
Class .X^4^r:_ 
Book .M7^H8 
Copyright ]^° 



COFKRIGHT DEPOSm 



THE LIFE STORY OF 
J. PIERPONT MORGAN 



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J. PIERPONT MORGAN 



THE LIFE STORY 

OF 

J. PIERPONT MORGAN ((/i 

A BIOGRAPHY 



BY 

CARL HOVEY 



ILLUSTRATED 



mew l^orft 

STURGIS k WALTON 

COMPANY 

1911 



Copyright 1911 
By STURGIS & WALTON COMPANY 

Set up and electrotyped. Published October, 1911 



ici.a;jo:5983 



PREFACE 

The biography of a living man is a special 
sort of thing to write or to read, and requires 
a little explanation from the author. Un- 
doubtedly the reader needs to know whether 
the thread of argument, which forms the 
more or less unconscious basis of every work 
of biographical writing, came, in this in- 
stance, from the subject himself duly posing 
for the public and expounding his character 
according to his own notions, or whether it 
proceeded independently from the writer's 
mind. 

The fact that this life takes Mr. Morgan 
neither angrily nor bitterly, nor extrav- 
agantly nor pathetically, nor according to 
any of the obvious methods of the Sunday 
special articles (in which, up to now, his life 
has been exclusively set forth) but under- 
takes to describe him seriously and intelli- 
gently, will undoubtedly convince some sim- 
ple souls that this tone was in some sense 
inspired. It is the natural inference, be- 



PREFACE 

cause to speak or write sensibly of the 
actions of any one of our magnified Captains 
of Industry (such in their power as the in- 
ventor of the phrase never dreamed of) is 
distinctly contrary to usage and custom. 
You must attack them or toady — there is 
supposed to be no middle ground. The rea- 
son for this state of things may be stated in 
five words: — ^these men personify political 
issues; and having stated it, let us leave it, 
and proceed to contemplate a fact much more 
important to writers and readers of biog- 
raphies. The fact, or rather, the proposi- 
tion, is this, — in order to depict a man as he 
really is one must set forth his own aims and 
objects, and show how he attains them, or 
how near he comes to attaining them, how he 
goes to work, and how he feels about his 
work. The opinions of others matter little, 
their theories little. It is idle to measure 
him with the ideal of some other world, or 
time. Suppose a Quaker to write the life of 
Napoleon, — as a Quaker, of course; seen 
through the peculiar green glass ideal of the 
hater of war, the man of war would come out 
sickly and unhuman. Almost anyone will 
admit that. But not everyone will admit 



PREFACE 

that it is possible to describe a Morgan with- 
out looking at him through the orange glass 
of the Socialist, or the glasses of whatever 
color of the dirty democrat, or the silken 
toady, the hater of the money power, the 
adorer of the rich and successful, and so on. 

The author faced these difficulties, and 
found them difficulties. As for the book, let 
it be said at once that it was conceived and 
written independently by the author; there 
was never the least influence or dictation 
from without. The material was gathered 
because the subject was interesting and the 
opportunities lay close at hand. And the 
argument, above referred to, grew of itself 
out of a close study of this material, and 
much questioning. It seems to be pointing 
to the conclusion that Mr. Morgan's life has 
been one of usefulness and benefit to in- 
dustry and to the country. This effect was 
unintentional, was not preconceived. But 
it was the perfectly inevitable result of aim- 
ing at truth and avoiding caricature. 

New York, 1911. ^' ^' 



CONTENTS 

CHAPTER PAGE 

I Childhood and Youth 3 

II Banking During the Civil War ... 34 

III The Railroad Wreckers 52 

IV The First Morgan Syndicate ... 67 
V The Rescue op Vanderbilt .... 83 

VI Railroad Chaos and Ruin .... 96 

VII The Beginning of Feudal Finance . . 121 

VIII The Treasury Crisis of 1895 . . . .146 

IX The Relief of the Government . . . 172 

X United States Steel 194 

XI The Spirit of Combination .... 224 

XII A Period of Reaction 252 

XIII World Banking 278 

XIV The Panic of 1907 293 

XV The Man Himself 311 



ILLUSTRATIONS 

J. Pierpont Morgan Frontispiece 

FACING PAGE 

Junius Spencer Morgan 14 

The Morgan Homestead in Hartford .... 22 

J. Pierpont Morgan at the age of Forty ... 88 

Charles M. Schwab, Henry C. Frick, 

Elbert H. Gary and J. A. Farrell 210 

Wall Street in the Panic of 1907 296 

Mr, Morgan's Yacht the Corsair 318 

Mr. Morgan's House on Madison Avenue, New 
York City 340 

The Library in Thirty-sixth Street, adjoining the 
residence at the corner of Madison Avenue . 340 



THE LIFE STORY OF 
J. PIERPONT MORGAN 



THE LIFE STORY OF 
J. PIERPONT MORGAN 

CHAPTER I 

CHILDHOOD AND YOUTH 

SINCE the year 1865, the American Re- 
public has been a business nation, and 
its strongest individuals have been business 
men, and the strongest of them all is the sub- 
ject of this biography. What is a business 
man? According to a recent and very 
straightforward definition ''the business 
man is not a monster ; but he is a person who 
desires to advance his own interests. That 
is his occupation and, as it were, his reli- 
gion." If we may accept this definition as 
accurate and generally true, then it clears 
the ground of certain sentimentalisms. The 
business man is not a statesman, or an altru- 
ist, or a philanthropist, at bottom; we only 
bungle our conclusions when we apply to him 
the measure of their ideals and objects in- 



4 J. PIERPONT MORGAN 

stead of using the measure of his o^\ti. It 
is often possible for a business man to helj) 
the public gratis, and come forward at the 
dramatic moment, as a noble and patriotic 
and disinterested citizen. The thing has 
been done by Mr. Morgan, as everyone 
knows, and followed by ink-spilling praises, 
and closely afterward by sardonic comment 
and reviling. They paint him too bright or 
too black, as demi-god in one breath and a 
monster in the next, and the wholesome 
truth, which is something less fantastic, re- 
mains untold. 

It is reasonable to remember that the 
great business man is neither saint nor devil, 
and that in the long run he is governed by 
the same practical motive of thrift as ninety- 
nine out of a hundred busy American citi- 
zens of this progressive daj^ He may ren- 
der an immense service for nothing, and get 
his name written across the sky — which is 
perhaps the last thing he thought of — but 
his most telling and characteristic service to 
the public, if service it is, comes from pur- 
suing his o\vTa ends. 

Having guarded ourselves against the 
usual foolish flights of fancy, let us admit at 



CHILDHOOD AND YOUTH 5 

once that there are real complications in the 
case of Mr. Morgan. He has become the 
dominant business force in the country and 
the strongest single financial power in the 
whole world, and, as a matter of fact, he has 
reached a point where no category will con- 
tain him. You cannot put Mr. Morgan in 
the pigeon-hole of a class. He is a genius, a 
spirit, a very conspicuous instrument of the 
economic evolution of his time. You cannot 
call him a mere money-maker, interested in 
temporary gains. He instinctively plans 
for something permanent in the structure of 
money-making activity; he has furnished 
the grooves in which all our industries shall 
be run for a very long time to come. 

There are not two opinions on this point. 
^'Organiser" and ''constructive force" are 
almost hackneyed epithets as applied to 
him. The accepted description of his work 
runs as follows: ''He was never a stock 
gambler; never a bear. He never wrecked 
a property nor depressed values that gain 
might follow. His work was always to re- 
construct, to repair, to build up. Instances 
of his force and ability in this direction are 
the Philadelphia and Reading, the West 



6 J. PIEEPONT MORGAN 

Shore, the Erie, and the Northern Pacific 
railways. In these instances and in others 
he saved and rehabilitated property that 
otherwise would have been ruined and ren- 
dered useless. His enemies may charge him 
with many faults — and he undoubtedly has 
many — but they can never say that he de- 
stroyed a property. Nor has any property 
which he has saved been exploited for gain 
on the stock market with his consent. His 
work has been in actual construction, in the 
actual creation of properties. His railroads 
have been working railroads, with rails and 
steam and rolling stock; his factories have 
been smoking factories, aglow with life and 
workers — not paper railroads and paper 
factories that exist only in the imagination 
of the stock jobbers. '' 

There is nothing of the charlatan sug- 
gested here; J. P. Morgan is solid. Fur- 
thermore, his rehabilitation of a vast amount 
of doomed property is mightily suggestive 
of broad public service. Other men have 
built up industries from the beginning, 
chiefly for themselves, as Rockefeller con- 
structed the Standard Oil Trust. But 
Rockefeller soaked up his competitors like 



CHILDHOOD AND YOUTH 7 

a sponge, while Morgan puts them on their 
feet and teaches and enforces cooperation 
among them all. 

A period of the fiercest industrial strife 
seems coming to an end. The head is now 
a long way from the foot of the financial 
body, which is so firm and gigantic that only 
the strongest forces can cause it to quiver. 
Out of a generation in which lived Gould, 
Fisk, the Vanderbilts, Eockefeller, Frick, 
Carnegie, Yerkes, Harriman, Gates, Heinze, 
Morse, one has emerged to rule. Perhaps 
it is not for nothing that Mr. Morgan has 
survived. 

The concentration of wealth and financial 
power that has taken place in Mr. Morgan's 
life-time is thus described by the informing 
writer already quoted: 

"In the old days of financiering, all men 
controlled their own money and invested it 
in a business which they managed them- 
selves. With very few exceptions (let us 
put in that farming is the chief exception) 
all this has changed, the great bulk of the 
money of the country now being invested 
in stocks and bonds, exchanged for insur- 
ance policies, or deposited in banks — its 



8 J. PIERPONT MORGAN 

control, as far as its profits are concerned, 
passing entirely out of the hands of its 
owners. Ownership in the numerous stock 
companies which have been organised in a 
comparatively few years is distributed 
among hundreds of thousands of persons, 
and thus the millions of the many have 
passed into the control of the few. 

''So the trite question: Who own the 
United States'? may not appear so impor- 
tant as the query : Who control the United 
States ? One hundred and ten of the comi- 
try's largest corporations, with a capitalisa- 
tion of $7,300,000,000, are owned by 626,934 
stockholders. The average stockholdings 
are 116 shares. The manufactories of the 
United States are owned by many individu- 
als, showing a fair diffusion of wealth, but 
their actual control is in the hands of a few 
men. In no other line has the control of the 
few been so apparent as in the conduct of the 
railroads, for the very laws which were cre- 
ated to prohibit railroad combination have 
fostered it. Less than a dozen men abso- 
lutely control fifty-four companies, with a 
capital of $4,157,000,000 and a total number 
of stockholders of 288,160. Of the fifty-six 



CHILDHOOD AND YOUTH 9 

great industrial companies, with a capital of 
$3,143,000,000 and an extended list of stock- 
holders, a few men are in control. 

''It will he seen, therefore, that the whole 
tendency of the system is concentration. 
The great central power of this concentra- 
tion is the hank. Mr. Morgan, hy his re- 
cent merger, has accordingly placed himself 
at the head of the greatest power in control 
of all the great potvers of wealth. It was 
said a few years ago that eight men virtually 
controlled the hidh of the hanking resources 
of cash and credit in the country. To-day 
one man is fast getting that power into his 
hands.'* 

The merger mentioned in the paragraph 
above is the consolidation by Mr. Morgan 
last January of the rich Guaranty, Morton, 
and Fifth Avenue trust companies of New 
York. The result is a towering institution 
possessing upward of $150,000,000 of re- 
sources, bearing the name of the Guaranty 
Trust Company. In addition, Morgan con- 
trols and directs the Astor Trust Company, 
the Banker's Trust Company, and the Lib- 
erty National Bank. His interests, direct 
and indirect, in other banlving institutions 



10 J. PIERPONT MORGAN 

are so far reaching that although it would 
scarcely be a work of ease for the arch con- 
solidator to create a Money Trust which 
should control, absolutely, the cash and 
credit of America, the possibility is one that 
occurs to many minds, and the Morgan dic- 
tatorship of money is already much more a 
reality than a conception of the imagination. 

For it will be seen that Mr. Morgan is not 
only the financial ruler by virtue of what 
he already has — he is a monarch who can 
extend his kingdom to suit his ambition or 
his need. 

Mr. Morgan rules money at the exact mo- 
ment of history when money is the thing to 
rule; when it is all important to financiers 
to be able to deny cash or credit to a would- 
be competitor's industry, to extend it to the 
trusts and combinations that are established 
in the field. 

It would be pretty and neat, though not 
truthful, to say that his present position in 
the seventy-fourth year of his life is one 
which he aimed at from the first — that he is 
realising his life 's ambition. But the reader 
will agree, I think, as he reads this biogra- 
phy, that Mr. Morgan has not been the self- 



CHILDHOOD AND YOUTH 11 

conscious force that he seems. In fact, it is 
obvious that in the year 1857, when the 
young Morgan entered business in New 
York, no man could possibly have foreseen 
the peculiar opportunities which the twen- 
tieth century would offer — the chance of an 
American kingship was utterly invisible to 
the most restless and conquering eye. 

His gigantic power is still new, and as yet 
little understood. He inspires his country- 
men with awe, and with another feeling, 
which is not exactly fear, but akin to it — a 
feeling of uneasiness. They see him in the 
terrific national changes of the times. 

Let us describe the beginnings of this ex- 
traordinary man. 

Mr. Morgan's earliest ancestor in this 
country was Miles Morgan, who settled in 
Massachusetts in 1636. His paternal grand- 
father was Joseph Morgan, a successful 
business man of Hartford, Connecticut ; his 
maternal grandfather was John Pierpont, 
the Boston preacher, poet, and reformer. 
Joseph Morgan was altogether less distin- 
guished than Pierpont, but, on the other 
hand, he has the credit of founding the 
Morgan fortune, while the other, after a 



12 J. PIERPONT MORGAN 

stormy, brilliant, but disappointing career, 
died as the holder of an obscure government 
post at Washington. His story is full of 
interest and pathos, and some of the traits 
of his marked character appear to be quite 
as real, if less definite, a bequest to his 
grandson as the fortune which came down 
from Joseph. 

Joseph Morgan fought in Washington's 
army until the Revolution was over, and 
then settled down to farming near the vil- 
lage of Hartford. He made money enough 
to invest it in stage lines and eventually rose 
to the control of the chief roads of transpor- 
tation in the State. Hartford, during the 
first quarter of the nineteenth century, had 
a great prosperity as the centre of long- 
distance traffic ; the main line of stage from 
New York to Boston passed through the 
city, running from Boston to Worcester, 
Springfield, Hartford, Middletown, New 
Haven, and New York— three days each 
way. Hartford also held the key to the 
trade of the Connecticut River valley, north- 
ward nearly, or quite, to the border of Can- 
ada. Innumerable taverns were sprinkled 
along the countryside, and Joseph Morgan 



CHILDHOOD AND YOUTH 13 

also dipped into this thriving business. But 
in the fall of 1839 the first locomotive— the 
"Vesuvius" or the ''Good Friend" or some 
other quaintly named piece of machinery — 
made its slow way across the State, and 
Hartford's business position was changed. 
The old customers were drawn away by the 
merchants of rival towns, the stage lines 
went to seed year by year, and this thrifty 
ancestor quickly bestirred himself in other 
directions. 

He opened a large hotel in Hartford, the 
"City Hotel," and soon afterward began to 
figure as a capitalist in connection with the 
^tna Fire Insurance Company of that city. 
At this time these companies had no cash 
capital, their resources being represented by 
the notes of the principal "solid men" of 
the town, notes ranging in sums from five 
to ten thousand dollars each. The expecta- 
tion was that the profits from the insurance 
business would render it unnecessary to 
call upon the note makers for cash to meet 
any fire losses, but a great fire in New York 
suddenly gave a different aspect to things. 
There was a period of heavy losses, and the 
prospect of calling upon the note makers 



14 J. PIERPONT MORGAN 

became so imminent that the notes were 
offered at a large discount to anyone who 
was willing to assume their liability. Jo- 
seph Morgan bought these notes wherever 
he could, acquiring a large number of them. 
Soon afterward the danger passed ; the pre- 
miums received for insurance proved ample 
to pay the losses ; the company began to ac- 
cumulate a capital stock, whose cash value 
was represented by the increasing profits of 
the business; and eventually the holders of 
the notes received stock in proportion to 
the liability they had assiuned. Joseph 
Morgan made a fortune from his holdings. 
It was this fortune which eventually placed 
J. P. Morgan's father, Junius Spencer 
Morgan, in the banking business. 

Joseph Morgan handed to his son, besides 
fortune and the capacity for making more 
money, a genial disposition ; he had the qual- 
ities of the old-time host in the hotel busi- 
ness, and his son Junius was a famous and 
agreeable entertainer on a different, and of 
course more sophisticated scale. 

Mr. Morgan's maternal grandfather, Pier- 
pont, was a ybtj well-knowai man in his 
time; the following passage from an un- 



CHILDHOOD AND YOUTH 15 

known hand (it is taken from an old copy 
of the Christian Examiner) shows the im- 
pression he made. The somewhat high- 
flown phraseology cannot quite spoil it as a 
real reflection of his soul : 

*'Mr. Pierpont united within himself the 
characteristics of two very distinct persons. 
One was graceful, cultivated, delicate, fas- 
tidious to the last degree, careful of eti- 
quette, studious, dignified; with a certain 
loftiness of dignity, indeed, which strangers 
were apt to find somewhat frigid, but genial 
and expansive with his friends, and beau- 
tifully tender and loving with children. 
This was the clergyman and the poet. 

''The other was the ardent knight, armed 
for battle, and seeking it far and near; 
. . . quick to discover injustice, he no 
sooner unearthed a new wrong than he at- 
tacked it with the ^evj ardour of a nature 
whose enthusiasm was but the hotter for the 
restraints which the habits and tastes of the 
scholar ordinarily imposed upon it. He 
used all his weapons at once : logic, sarcasm, 
invective, poetry — and sharpened them all 
with a stern 'Thus saith the Lord!' This 
was John Pierpont, the Reformer; and 



16 J. PIERPONT MORGAN 

. . . few names rang wider throughout 
the careless, prosperous land than his. ' ' 

Clearly an insurgent of those days ! Pier- 
pont failed as a lawyer, failed as a merchant ; 
as a clerg}Tiian he won fame, but gave his 
congregation no peace or rest, and in one 
place after another they turned upon him. 
His most important pulpit was in the Hollis 
Street Unitarian Church of Boston. ''He 
was liable to open his Hollis Street pulpit," 
says a writer, "any Sunday morning with 
either or both temperance or slavery. He 
preached temperance to a congregation of 
men who drank rmn, sold rum, made rum 
. . . of course he gave mortal offence." 
And again, "His fight lasted seven years, 
one man against many, poverty against 
wealth, right against wrong." At last he 
was formally placed on trial by an ecclesi- 
astical council for "preaching on exciting 
topics," and for failing to conduct himself 
"with Christian meekness." The exciting 
topics were "the meanness and crime which 
he saw about him in high places" ! The im- 
mediate result of the trial was a vote of cen- 
sure, but Pierpont soon left the church for 
another, far away. 



CHILDHOOD AND YOUTH 17 

The year 1861 saw him in Boston again, 
and he went to the front as chaplain of the 
Twenty-second Massachusetts Regiment. 
The regiment went into camp on the north 
bank of the Potomac. It was shrewish fall 
weather, and the chaplain, now an old man, 
was unable to endure the cold. He was seen 
walking about most of the night beating his 
body with his hands to keep his blood from 
freezing. He sent in an application to the 
commander of the brigade for three days' 
leave, intending to look for some occupation 
in Washington. The officer had never 
heard of him and sent back the paper with 
a message scrawled across the back, *'Why 
does he want three days'? Give him two." 
In a very depressed state of mind the old 
man called upon Secretary Chase and mod- 
estly inquired if there was not some clerical 
work he could do. The secretary, who knew 
him well by reputation, shook his hand 
warmly, agreed to do anything he could for 
him, and did, in fact, provide him with a 
work of compilation for the Government 
which occupied the elderly clergyman until 
his death. 

Of all the effort and struggle of this man's 



18 J. PIERPONT MORGAN 

life there only remains a school-book piece 
of verse — '' Warren's Address" — do you not 
recall it? — beginning, 

Stand ! The ground 's your own, my braves ! 

and a volume of poetry entitled ''Airs from 
Palestine," now unread. There are verses, 
however, which pulsate with the vigour of 
protest. Here is a specimen, the first stanza 
of "A Word from a Petitioner," which has 
an oddly contemporaneous sound: 

"What ! our petitions spurned ! The prayer 
Of thousands — tens of thousands — cast 

Unheard beneath your speaker's chair! 
But ye will hear us, first or last. 

The thousands that, last year, ye scorned, 
Are millions now. Be warned ! Be warned ! 

Such were the strong feelings and the 
nature of J. P. Morgan's grandfather. 
Threads of Pierpont's personality are dis- 
tinctly to be seen, however entangled, in the 
later man; terribly strong feeling, wilful- 
ness, an aspiration for the beautiful, in 
both. 

As soon as Junius Spencer Morgan grew 
up his father obtained a clerkship for him 
with the banking house of Morris Ketcham. 



CHILDHOOD AND YOUTH 19 

The young man remained here several years, 
finally leaving to become a junior partner in 
the dry-goods firm of Howe, Mather & Co. 
in his native town. During this period he 
married Juliet Pierpont, the clergyman's 
daughter, and their child, John Pierpont 
Morgan, was born April 17^ 1837. J. S. 
Morgan showed great business ability and 
was soon invited to become a partner in the 
house of J. M. Beebe & Co., one of the largest 
retail stores in Boston. But a few years 
later he met George Peabody, the great Lon- 
don banker, and shortly after the meeting, 
he entered Peabody 's jorosperous firm. 

Peabody was American born, and for a 
long time was a merchant of Baltimore. 
After he became well established in the 
banking business in London, he became 
widely known on account of his Fourth of 
July dinners, which he gave annually for 
the purpose of creating good feeling between 
England and his own country. One of these 
occasions the Duke of Wellington honoured 
with his presence and Queen Victoria sent 
her portrait and Prince Albert's to hang in 
the dining hall. Peabody was the most 
widely known philanthropist of his day and 



20 J. PIERPONT MORGAN 

gave millions for the housing of the poor in 
London and for the cause of education in the 
Southern States of America. On his visit 
to Boston he was in reality seeking a part- 
ner to pave the way for his own retirement 
from business ; the name of Junius Morgan 
was strongly urged upon him by Morgan's 
friends — with the result which proved so 
favourable to the Morgan fortunes. One of 
the stipulations in their agi'eement at the 
time was that Junius Morgan should take 
upon himself the entertainment of the firm 's 
American and other friends, for which he 
was to receive twenty-five thousand a year 
as expense money. 

Young J. P. Morgan spent the first four- 
teen years of his life in Hartford. The 
house in which he was born still stands. It 
was a small and unpretentious building of 
red brick which stood on the village street 
in the centre of a few acres of land. Some 
years ago it was raised one story and a store 
was set in under it, and now it is being 
closely crowded by business blocks in what 
is the centre of Hartford. J. P. Morgan's 
associations are not with this house, how- 
ever, for his parents only lived here during 



CHILDHOOD AND YOUTH 21 

the fii'st year or two, then they moved to the 
large and comfortable house on Farmington 
Avenue which Joseph Morgan had had built 
as a wedding present for his son. Round 
it lay a farm of about one hundred acres 
which extended half a mile to the west to a 
stream called Little River. At the age of 
six young Morgan was sent to the district 
school. 

As a boy he was a quiet, reticent person- 
age ; one who went about his own affairs and 
.-who was marked neither by especial bril- 
liancy nor especial dulness at his studies. 

He was cool, matter-of-fact, and stamped 
with a determined quality and a kind of 
dignity which left a lasting impression upon 
the memory of some of his school-mates 
even if it did not awe them very much at the 
time. The first thing he gained at school 
was a nickname — in this way. The roll 
of the class was being called and one by one 
the boys stood up and gave their names. 
It came Morgan's turn: 

''John Pierpont Morgan,'' he announced. 
He was asked to say it again because of his 
uncommon middle name. "Pierpont," he 
repeated, ''John Pierpont Morgan." 



22 J. PIERPONT MORGAN 

The teacher got it correctly, but not the 
other boys. They saw fun in that mid- 
dle name. *'Pierp" — ^^'Pip — Pip" Morgan 
came from the back of the room in a loud 
whisper, and "Pip" Morgan he was called, 
and nothing else, from that day on. 

*'Pip" Morgan spent most of his spare 
time fishing in Hog Creek; once he built 
himself a flat-bottomed, pointed skiff, in 
which he used to float about in the muddy 
stream; the new boat was better than the 
raft, which served the other boys. 

At the age of twelve he was a well-grown, 
chunky boy, and as he went on in his teens 
he was large and well filled out for his age. 
But after a time his health began to suffer, 
he lost his ruggedness and constitution, and 
it w^as necessary for him to be constantly 
under a doctor's care. 

After the family moved to Boston, he 
attended the English High School until his 
graduation in 1853. The next year he spent 
at Fayal in the Azores after which he con- 
tinued his education abroad, spending a 
year at Vevay, Switzerland, and two years 
at the University of Gottingen in Germany. 
Here he also received a treatment of mud 



CHILDHOOD AND YOUTH 23 

baths wMch proved beneficial. With his 
health much improved he left Gottingen to 
enter his father's banking house in London. 
A remark which his father made at this 
time has come to us from one who knew the 
elder Morgan — and who treasures the re- 
mark as a choice example of life's little 
ironies. ^^I don't know," said the London 
banker, "what in the world I am going to 
do with Pierpont." The question seems 
reaUy to have caused him unnecessary anx- 
iety. He was also concerned about his 
son's abrupt and often antagonising man- 
ner, so much the opposite of his own. His 
friends assured him that there was nothmg 
to be done about this; his son's way was 
natural to him, really without intentional 
offence, a part of his constitution, and you 
could not turn granite into wax. At this 
period the young man was becoming initi- 
ated into the technical mysteries of his 
trade. He was learning what bills at sixty 
days on Paris or Amsterdam or Hamburg 
were worth in francs, guilders, the marc 
banco, and so on through all the delicately- 
balanced system of foreign exchanges, which 
changed from day to day. 



24 J. PIERPONT MORGAN 

[AJQ anecdote shows how his father backed 
him up and the faith of the older man in 
his son's business judgment. Someone sug- 
gested to young J. P. that coffee was a 
**good speculation." Mr. Morgan decided 
that it was, too, and went out and bought — a 
whole shipload. When he told one of the 
partners of Peabody & Co. what he had 
done the other was shocked. 

**Why, it's absurd," he said, ''to buy all 
that coffee — where will you get the money?" 

Mr. Morgan stared at him angrily for a 
moment and then walked out of the room 
without saying a word. In a very short 
time he came back with a draft in his hand 
and slapped it on the table before the Eng- 
lish banker. "There," he said sharply, 
''there it is." 

It was a draft for the full amount of the 
large sum involved in the transaction signed 
by Junius Morgan. 

The year 1857 saw one of the most ter- 
rible financial panics which ever visited the 
United States. At this time the house of 
George Peabody & Co. was doing its Ameri- 
can business with the firm of Duncan, Sher- 
man & Co. of New York. During this crisis 



CHILDHOOD AND YOUTH 25 

the American firm couldn't meet its matur- 
ing credits in London, and its inability to 
do so greatly embarrassed George Peabody 
& Co. Under this strain the London firm 
was obliged to appeal to the Bank of Eng- 
land for assistance, which it finally received. 
The outcome of it all was the sending of 
young Pierpont to America, where he be- 
came cashier, and his father's representa- 
tive, with the firm of Duncan, Sherman & 
Co. 

Here he met Mr. Dabney, the man whom 
he afterward selected as partner when he 
went into business for himself. Dabney 
was one of the most expert accountants in 
the city, and it was from him that Mr. 
Morgan acquired his remarkable and accu- 
rate knowledge of bookkeeping, a knowl- 
edge invaluable to him, and the extent of 
which, together with the resulting ability to 
analyse accounts and statements of the most 
intricate character, has excited the wonder 
of every man who has ever come in contact 
with him. In the course of time Junius 
Morgan wrote the American firm suggesting 
that they give his son a partnership. They 
— declined. Here Mr. Morgan's career 



26 J. PIERPONT MORGAN 

really began ; for, soon after, his father di- 
rected hini to take an inexj)ensive office, and 
agreed to turn over to him, gradually, the 
entire business of George Peabody & Co. 

Two paragraphs, printed in the columns 
of the Bankers' Magazine of that time, 
speak for themselves. The first reads : 

"Messrs. J. Pierpont Morgan & Co. and 
Mr. C. H. Dabney (for several years of the 
firm of Duncan, Sherman & Co.), have as- 
sociated together as bankers, under the firm 
of Dabney, Morgan & Co., Exchange Place." 

The second is: ''Messrs. Duncan, Sher- 
man & Co. have transferred their London 
account, late with Messrs. George Peabody 
& Co., to the banking firm of Messrs. Fin- 
lay, Hodgson & Co., a concern of very old 
and w^ealthy standing. The withdrawal of 
^Ir. Peabody and his large capital and ex- 
perience will doubtless induce a number of 
other changes in American accounts in Lon- 
don." As Junius Morgan continued the 
Peabody business, taking it direct from 
George Peabody 's hands, this w^as revenge. 
But the firm of Duncan, Sherman & Co. 
was even then in sight of the failure which 
afterward overcame it. 



CHILDHOOD AND YOUTH 27 

Besides Mr. Dabney, Mr. Morgan had for 
a partner Ms cousin, James Goodwin, now 
of Hartford. The office of the new firm 
was on the second floor of Number 50 Ex- 
change Place, and even for the days when 
*' model" office buildings were three stories 
high, could not have been called palatial. 
The big firms had their offices on Wall Street 
or on William Street. There is nothing in 
Mr. Morgan's career in these earlier days 
which suggests that he had at that time the 
slightest comprehension of what his rela- 
tions as a banker and a constructive force, 
either in the world of railway affairs, or in 
industrial development, was to be. He 
looked upon himself then, as in fact he al- 
ways did until he was forced by imperative 
pressure to lead in the reorganisation of 
bankrupt railroads, as a banker pure and 
simple. 

In the summer of 1859 Mr. Morgan sailed 
for Paris to see the lady who was soon to 
become his wife. She was Miss Amelia 
Sturges, the daughter of Jonathan Sturges 
of New York. Miss Sturges was an in- 
valid ; in reality she was dying of consump- 
tion. Mr. Morgan persuaded her to marry 



28 J. PIERPONT MORGAN 

Mm, declaring that lie would take her the 
world over to find her health. He dropped 
business entirely after his marriage and de- 
voted himself to the dying woman. She 
lived only a few months after their wedding. 

He returned to New York and plunged 
into his work again. He lived quietly, be- 
ginning the day with a horseback ride in 
Central Park and often spending the even- 
ing at the house of one of his friends. His 
interest in pictures, always strong, occupied 
him much at this time. He bought his first 
oil painting at the Sanitary Coimnission 
Fair, held in a big, temporary structure on 
Fourteenth Street. It was the portrait of a 
young and delicate looking woman, the 
work of an artist named Baker, and the 
price was $1,500. The picture hung for 
many years over the mantel in the library 
of Morgan's home, at 42 West 21st Street. 

His first striking transaction occurred 
after the breaking out of the war, and about 
the time that Charleston, S. C, was block- 
aded. Gold was commanding a premium, 
but it was thought that Charleston would 
fall, and with it, the premium on gold. 
With this idea strongly in mind the impor- 



CHILDHOOD AND YOUTH 29 

ters who owed money abroad were putting 
off from day to day their remittances to 
meet their maturing bills, hoping to coin 
their remittances in gold later on at a much 
lower price than the market then afforded. 
But gradually the truth dawned upon them 
that Charleston was not going to falL. 
Meanwhile the price of exchange was begin- 
ning to force gold shipments to London, 
which made matters much worse, since 
every shipment of gold tended to force up 
its price. 

The favorite place to watch this terrify- 
ing upward movement was the "gold room." 
This peculiar institution was a private en- 
terprise, kept by a man named Gallagher in 
a building at the corner of William Street 
and Exchange Place. Anyone could deal in 
the gold room after paying a fee of twenty- 
five dollars a year. It was open all day, 
whereas the Stock Exchange, which then 
held two sessions, closed its morning session 
at twelve and was open again for only a 
short time in the afternoon. According to 
the custom of that time, the presiding officer 
of the 'Change simply called down a list of 
stocks, and the brokers, gathered in a kind 



30 J. PIERPONT MORGAN 

of pit, bought and sold their stock when the 
officers reached its name. Gold was last on 
the list, and the form of routine was alto- 
gether too slow and unwieldly on the regu- 
lar exchange to take care of the feverish 
business in that connnodity. 

To those in daily touch with the gold room 
it became evident that a crisis was coming 
fast upon those importers with their de- 
layed remittances. The movement was 
sharpened by small shipments of gold, and 
it was very clear that if any large shipment 
took place the importers would throw up 
their hands in a panic and rush to buy gold 
to save their skins. 

There was a young fellow among the 
watchers whose sharp sight took this in; it 
was E. B. Ketcham, of the banking house of 
Ketcham, Son & Co., and a friend of J. P. 
Morgan's. He went to Mr. Morgan, and 
this is what took place: 

*' What's the condition of the exchange 
market?" Ketcham inquired first. 

''Very anxious," replied Mr. Morgan. 

''How good is your exchange credit — how 
much exchange could you market*?" 



CHILDHOOD AND YOUTH 31 

*'Two or three millions," said Mr. Mor- 
gan. 

''I've got an idea, which I think worth 
considering," went on the other: "Sup- 
pose we buy a couple of millions of gold and 
ship it abroad on next Saturday's steamer. 
You haven't got the money to ship the gold, 
but our firm has. We'll make it a joint ac- 
count with Peabody & Co. and yourself. 
The result will be to advance the price of 
gold several points and to give you a clear, 
exclusive exchange market to draw against 
on shipment, which will reimburse us within 
a week, with a big profit on the gold we pur- 
chased." 

The proposal thoroughly appealed to Mr. 
Morgan's business judgment. As a result 
the two young men journeyed up to West- 
port, Conn., that afternoon, to talk the mat- 
ter over with the senior partner of the 
Ketcham house. This was Morris Ketch- 
am, with whom Junius S. begun in business. 
The older man soon consented, saying : "If 
you boys think you are right, go ahead." 

It was very necessary to go ahead cau- 
tiously to prevent the plan from becoming 



32 J. PIERPONT MORGAN 

known. In shipping gold double eagles 
were used — you had to go to a bullion 
dealer and buy the exchange for the ordi- 
nary run of gold, paying a slight premium. 
Thus either Morgan or Ketcham had to ap- 
pear as a buyer of double eagles, the only 
possible use of which was to ship abroad. 
The bullion dealers got some inkling, but the 
purchases were timed when other shipments 
were taking place, so far as could be done. 
And the following Saturday saw the gold 
shipped, two millions of it. 

Almost immediately there was an advance 
in the price, and yet, when the traders met 
in the gold room on Monday morning, things 
were unaccountably quiet. Mr. Morgan be- 
came impatient, even nervous. ''What do 
you think? What do you think?" he whis- 
pered to his partner in the deal. They 
waited. At the Stock Exchange was a man 
from Ketcham & Co. under orders to buy 
enough gold to put it at a certain point. 
Both speculators knew the hour when gold 
would be reached in the trading. But sud- 
denly the bidding broke out in the gold room 
itself. 

"I'll sell half a million," said a man, 



CHILDHOOD AND YOUTH 33 

'* notwithstanding the large amount of ship- 
ment/^ 

"I'll take that half million and another 
half million at a half per cent, higher," an- 
swered Mr. Morgan's partner, promptly, 
and, after that, there were no more attempts 
to break the price. The importers now fell 
into line; they had put off their exchange 
operations so long that they were now 
obliged to draw sight exchange and Mr. 
Morgan was the only one who could give it. 
In less than two weeks the money used in 
the gold purchased was recouped by the sale 
of Mr. Morgan's exchange, and the transac- 
tion was closed up with a profit of a hun- 
dred and sixty thousand dollars — which was 
considered big business in those days. 



CHAPTER II 

BANKING DURING THE CIVIL WAR 

THERE is a thoughtless saying, which is 
only partly true, that Mr. Morgan is 
not a self-made man. With him, indeed, 
there was never anything resembling the 
famous Rockefeller account book — nine dol- 
lars and eighty cents this month received, 
five sixty expended '^for necessities," — bal- 
ance, four-twenty toward the distant Palace 
of Ambition — written out in a cramped, 
clear, boyish hand. From the first, he stood 
at a certain height above the crowd, and be- 
gan life in New York easily, possessing all 
the advantages and claims of a successful 
banker's idolised son. 

But although the name and business con- 
nections of Junius Morgan furnished him 
v^th a substantial pedestal, Pierpont Mor- 
gan has made it a mountain, and withdrawn 
to the very top with his allurement of the 
Midas touch. There capital seeks to follow, 

34 



BANKING DURING CIVIL WAR 35 

and really competes for the notice of the all- 
powerful individual whose name carries 
conviction and stands for success. The 
Morgan name, coupled with an enterprise, 
is reckoned as much an asset as stores of 
gold. And this enchantment is his own 
work. By virtue of all that separates his 
commonplace, if comfortable, inherited po- 
sition from his CyclojDean influence and au- 
thority to-day, Mr. Morgan is ''self-made." 

His growth was slow; it occupied all of 
fifty years, counting from the year he began 
as a banker's clerk in '57. He went on do- 
ing harder and harder things, and as his life 
has been built up in that way, the conse- 
quence is that when we go back to the period 
to be dealt with in the present chapter — that 
of the Civil War, and shortly after — we go 
back to an astute and terribly efficient per- 
sonality, but nothing like the Morgan of 
to-day. Not outwardly. With all his un- 
conscious egoism, he subordinated himself, 
first to his father, and afterwards to the 
Drexels, and he was middle-aged before he 
became quite his ov^tq master and was ut- 
terly free. 

As a young man he was as restive as a 



36 J. PIERPONT MORGAN 

youthful athlete who has not yet tried his 
strength and powers at a meet; intense 
physical and mental energy, an abrupt and 
sure way of going after things, whether it 
was the little matter of playing petits cJie- 
vaux in the kursaal at a franc a play when 
he was at Feligh's School at Vevay, Switzer- 
land, or some complex piece of banking 
which came to his hand at the beginning of 
his career, when he was clerk for Duncan, 
Sherman & Co. 

The year he came to New York was the 
year of a terrible crisis in Wall Street; 
beginning with the crash of the Ohio Life 
and Trust Company in midsummer, 1857, 
nine hundred failures were reported. At 
one time the great London firm of Pea- 
body & Co., in which the fortune of Mor- 
gan's father was bound up, was known to 
be 171 extremis; it was perfectly solvent, 
but, like other firms, it had for the time to 
lie out of its money and could not meet its 
engagements. It was predicted that the 
fall of Peabody & Co. would start a general 
panic in London. But the suspension of 
the Banking Act enabled the Bank of Eng- 
land to advance Mr. Peabody one million 



BANKING DURING CIVIL WAR 37) 

pounds, which saved the situation in that 
quarter. In New York, however, there was 
no such relief. The banks took alarm and 
convulsively stopped short their customary 
advances; commercial houses went down 
by dozens; and then the public caught the 
panic and, turning upon the banks, began a 
run for their deposits. The banks, in turn, 
found they could no more conduct their 
business without credit or faith than their 
customers, the merchants, could, and a gen- 
eral suspension of specie payment had to 
follow. 

The very means which the bankers took 
to prepare against a run produced a run 
and closed their doors. A week before they 
were forced to suspend, they announced 
that they would change their policy and meet 
the panic by its natural remedy — a reason- 
able expansion of credit; and it was the 
publication of their returns in the week 
following, showing in all the plainness of 
print that instead of expanding they were 
carrying the refusal of credit still further, 
which brought the public down with a howl 
upon their doors. 

As an object lesson this panic of 1857 



38 J. PIERPONT MORGAN 

was clean-cut and decided. And it was 
Morgan's initiation into the wild and tragic 
possibilities of a financial hurricane. He 
was a clerk, twenty years old, at the time, 
but he studied and thought out every phase 
of the situation, and there are men now 
living, bankers of an elder day, who recall 
his eager and persistent questioning as to 
the why and wherefore of the steps they 
took then. In spite of his youth he did not 
seem tempted to criticise; he wanted an- 
swers to his questions, but kept his conclu- 
sions to himself. 

The storm passed and business went 
calmly and solidly ahead for three years 
more. Moses Taylor taught the bankers 
of New York the invaluable advantages 
of cooperation by means of a Clearing 
House association. Commodore Vander- 
bilt had his fleet of sixty ships. Trenor 
W. Park constructed a short route to 
California, by means of a railroad forty 
miles long across the Isthmus of Panama. 
A. A. Low, father of Seth Low, was build- 
ing up foreign commerce, sending packet 
ships to China and the Far East ; and there 
was a rapid development of ocean steam- 



BANKING DURING CIVIL WAR 39 

ship service between Boston, New York, and 
Liverpool and Continental ports. At that 
time the greater part of our foreign ex- 
change represented exports of cotton, and 
the phrase "Cotton is King" was invented. 
There were few banking houses in New 
York doing an international business and, 
almost without exception, every one of that 
day is now known only by tradition. Dun- 
can, Sherman & Co., by whom young Mor- 
gan was employed, was borne safely out of 
the panic on the broad shoulders of Pea- 
body & Co., but disappeared in the years of 
depression which followed the still greater 
panic of '73. 

The railway mania had not yet begun ; in 
the East, the Pennsylvania, and, to some 
extent, the Baltimore & Ohio, were begin- 
ning to feel their way toward the develop- 
ment of the Middle West, but the roads 
were disjointed, straggling, tentative ex- 
periments, and the varieties of gauge and 
the grotesque differences in the make of 
cars made it impossible to carry through 
freight from Chicago, then a young city, 
making her own future, or from Cincinnati, 
to the East, without dozens of changes of 



40 J. PIEEPONT MOEGAN 

traffic and continuous expense and delay. 
The Harlem railroad was about bankrupt; 
the New Haven system was undreamed of, 
the railroad consisting entirely of a line 
stretching from the Bronx River to New 
Haven, sixty-two miles away. 

Mr. Morgan's cousin, E. D. Morgan, who 
became Governor of New York just before 
the War, and who was afterwards United 
States Senator, was directing the unfortu- 
nate Hudson River Railroad, as, earlier, 
Sam Sloan had done. Many thought that 
this railroad was a monument of folly, rep- 
resenting a mad investment of capital, since 
it was not conceivable that a line running 
along the banks of the Hudson could suc- 
cessfully compete with water navigation. 

With these developments Mr. Morgan 
had little practical concern for the moment. 
His face was turned toward Europe and the 
exchange market in financial centres across 
the water. A banker, such as he was, was 
just as necessary to the movement of for- 
eign commerce as the ships which carried 
the trade. Foreign exchange, in a sentence, 
is an evidence of indebtedness represented 
by a negotiable paper; its object is to re- 



BANKING DURING CIVIL WAR 41 

move the burden of shipping coin. When 
we export cotton, a credit is opened with 
the English buyer, who arranges with his 
banker to accept drafts of the American 
dealer, and notifies the American cotton 
dealer to draw his sixty-day bill on the Lon- 
don bank, with shipping documents at- 
tached. The New York banker buys this 
bill of the dealer, thus supplying him, with- 
out trouble and at a small charge, the neces- 
sary cash to pay the farmer who raised the 
cotton. The dealer in exchange brings to- 
gether a customer in London, or it may be 
in Batavia, Siam, or the coast of Africa, — 
and a seller in the United States; the two 
practically stand in front of his desk and 
receive what is justly due them, although 
they may actually be ten thousand miles 
apart. It was this kind of business which 
occupied Mr. Morgan throughout his early 
career, and he learned it thoroughly in all 
its manifold ramifications. He kept stead- 
ily at it when the War broke out. 

Salmon P. Chase, Lincoln's Secretary of 
the Treasury, came to New York after the 
defeat at Bull Run and appealed to the 
bankers of the Clearing House Association 



42 J. PIERPONT MORGAN 

to stand by the Government in the fearful 
emergency which had arisen. The Federal 
credit had sunk below that of private prop- 
erty; Europe thought the Government 
doomed, the whole fraternity of the Roths- 
childs shut their fists and treated the risk 
of loaning money to the United States about 
as a modern banker would treat a proposal 
to purchase the bonds of the old Confeder- 
acy. The Secretary met the bankers in the 
directors' room over the main banking office 
of the American Exchange Bank, and said 
to them: 

*' There is really more need of gold right 
now than of troops. The Confederacy ex- 
pects to secure gold by sending cotton to 
Europe ; and, until we can build a navy, we 
can barely interfere with the export. We of 
the North have no cotton. What are we to 
do? I am not a financier; I can only ad- 
minister funds. You bankers of New York 
must show the Federal Government how to 
get this gold, or we shall go on the rocks to- 
gether!" 

Wall Street came to the front — at twelve 
per cent, interest ; even at that price it was 
no child's play raising the wind. For there 



BANKING DURING CIVIL WAR 43 

were people in every group who thought 
they saw the nation crumbling to pieces. 
Mr. Morgan was a Republican in politics 
and had plenty of faith in the survival of the 
Union. Although he played no important 
part in financing Government loans, he en- 
gaged to secure gold from Europe, having 
established his own banking firm early in 
the War, and beyond this he kept the house 
of Peabody & Co. thoroughly informed, not 
merely about the work of the army, but also 
concerning the financial condition of the 
country, our sources of strength, our ability 
to meet any taxation, and the certainty that 
no ruinous issues of Government bonds 
would ever be made. All of which had its 
effect and reached a tangible result, in the 
following way. 

Charles Francis Adams, then Minister 
from the United States to Great Britain, 
had protested vigorously against the con- 
struction of ships designed, as he said, for 
service as Confederate cruisers, and par- 
ticularly against permitting these ships to 
sail from British waters upon their pri- 
vateering cruises. As Minister, he had 
gone so far as to say that this would be re- 



44 J. PIERPONT MORGAN 

garded by tlie Washington Government 
as an unfriendly act, an act of purposed 
unfriendliness. The British Government, 
unable to answer the logic that was 
in Adams's protest, set up a demand that 
he should deliver to it a million pounds in 
gold as a protection fund out of which any 
possible damages could be paid. The Brit- 
ish insisted that the money should be turned 
over within five days — an apparently 
impossible condition, inasmuch as Adams 
could not communicate with the United 
States in less than two weeks, and of 
course could not personally command so 
great an amount of gold as that. He saw 
that he w^as in a trap, since he could not 
deny England's right to have a money se- 
curity against possible damages. 

In this intensely serious predicament 
Adams sought help from the London 
bankers, but it was not forthcoming. At 
last, however, he received in secret a rep- 
resentative of Peabody & Co., who brought 
the information that the American firm was 
ready to advance him five million dollars in 
gold, and would do it immediately, upon the 
sole condition that the transaction should 



BANKING DURING CIVIL WAR 45 

be absolutely confidential. No one else, ex- 
cept President Lincola and Secretary Sew- 
ard, was to know one word about it. The 
only security asked was Mr. Adams's re- 
ceipt, signed as American minister. The 
gold was, within a day, delivered ; and Great 
Britain was compelled to place an embargo! 
upon all of the suspected privateers. 

The late Frederick D. Tappan once said 
that he was impressed in the early days of 
the Civil War, by the absolute faith and the 
spirit that is nowadays called optimism 
which the young son of Junius Morgan was 
at that time revealing. He remarked that 
although Mr. Morgan was then, as always, 
a man of few words, yet it was impressive 
to hear him express his firm belief, not only 
in the ultimate success of the United States, 
but also in the irresistible resources of the 
country, which he was certain would prove 
ample to meet any imaginable cost to press 
the fighting to the end. 

*'We are going some day to show our- 
selves to be the richest country in the 
World in natural resources," said Mr. Mor- 
gan, with his sharp, staccato emphasis. ^'It 
will be necessary to go to work, and to work 



46 J. PIERPONT MORGAN 

hard, to turn our resources into money, to 
pay the cost of the War, just as soon as it 
is ended." 

To realise what this means it is neces- 
sary to recall the fact that as late as Sep- 
tember, 1864, the London Times considered 
that the holders of the Erlanger Confeder- 
ate bonds were better off than the holders of 
Federal securities. 

Mr. Morgan was not in the way of doing 
Government business at this time; he kept 
strictly to his own path, and politics he 
disliked with a constitutional malaise. The 
conditions required a very cautious and far- 
seeing management; almost incalculable 
factors and abrupt changes entered into the 
daily business. The bankers and the Gov- 
ernment were both involved in a web of dif- 
ficulties, which Congress sought to relieve 
by legislation, some of which only aggra- 
vated the trouble. Senator John Sherman 
secured the passage of an act making green- 
backs legal tender upon the Government 
''fiat," and this and the creation of the na- 
tional banking system in '63 proved instantly 
helpful, supplying the country which, hav- 
ing no fractional currency, had been mak- 



BANKING DURING CIVIL WAR 47 

ing use of postage stamps and various to- 
kens, with ample money. On the other 
hand, the suspension of specie payment, the 
scarcity of gold as measured by paper 
money, put gold at a premium and led to 
fevered speculation in the latter precious 
commodity. Speculation in gold was at- 
tacked as a national evil ; the stock exchange 
refused to allow it, but the gold speculators 
got together in the Gold Room and did a 
greater volume of business than ever. 
Then Congress outdid itself by passing, in 
June, 1864, the famous Gold Act, which 
made it a crime to buy or sell gold. But 
this action did utter violence to the business 
judgment of the bankers throughout the 
country; they were ready to discourage 
gold speculation, but to forbid it was ab- 
surd, because if gold could not be offered 
in the open market at any time no one would 
know what it was worth, and every one who 
possessed any would simply lock it up and 
hoard it. 

The New York bankers, J. P. Morgan 
among them, characterised this proceed- 
ing on the part of Congress in the following 
way: 



48 J. PIERPONT MORGAN 

*'It is one of the most extraordinary 
and visionary acts of legislation ever 
passed in this country, or in any other 
country. So far from aiding the Govern- 
ment in its design to put do^vn speculation 
among brokers and speculators, it has 
had, and will continue to have, an entirely 
different effect. The rate in Wall Street 
immediately advanced to 200, 205, 210, and, 
in fact, to 225. This Gold Act is only one 
more instance of utter lawlessness on the 
part of Congress to interfere with the 
ordinary business transactions of a commer- 
cial city. The cause of the rise in gold does 
not, did not, arise in Wall Street. The 
cause was the unwise issue of several hun- 
dred millions of paper currency at Wash- 
ington and in the enormous importations 
following the uncalled for inflation." 

The agitation and alarm spread rapidly, 
and as the facts were all with Wall Street 
in this instance. Congress was put to the 
humiliation of repealmg the law within a 
few weeks. The effect of the experiment 
on Mr. Morgan's mind was lasting. 

We have related in the first chapter how 
Mr. Morgan went into business for himself 



BANKING DURING CIVIL WAR 49 

at 53 Exchange Place under the firm 
name of J. P. Morgan & Co., and how the 
firm was afterwards changed to Dabney, 
Morgan & Co. An account of his first 
marriage was also given. In the year 1865 
he married again, and his second wife, the 
present Mrs. Morgan, was Miss Frances 
Louise Tracy, daughter of Charles Tracy, 
a lawyer in New York. The Morgans went 
to live at No. 227 Madison Avenue. They 
lived rather quietly, and Morgan himself 
was seldom seen in public places. The 
number of his acquaintances was compara- 
tively limited and he had few close friend- 
ships outside of his own family. He had 
three sisters living, all younger than him- 
self; Sarah Spencer Morgan, who married 
George Hale Morgan in 1866 ; Mary Lyman 
Morgan, who married "Walter Haynes 
Burns in '67 ; and Juliet Pierpont Morgan, 
who afterwards became the wife of the Rev. 
John B. Morgan. His only brother, Ju- 
nius, died at the age of twelve. To his sis- 
ters — Mrs. Burns and Mrs. John B. Morgan 
are still living — he was, and always has 
been, very personally devoted. 

At the time of his second marriage he 



50 J. PIERPONT MORGAN 

was stout in appearance, in good health, 
and wore a moustache. At least once in 
every year he crossed to London to discuss 
the details of the banking business with his 
father, who was now head of the London 
house, which had been Peabody & Co. In 
the year 1866 his daughter Louisa Pierpont 
Morgan, now Mrs. Herbert Satterlee, was 
born, and in 1867, his son John Pierpont 
Morgan, Jr., now known as Jack Morgan, 
and pointed to as his father's successor. 

Quietly industrious, i^rosperous, invin- 
cibly energetic, yet fully content to pour 
the full stream of his energies into ordi- 
nary business affairs, Mr. Morgan was 
nearing thirty, without having given more 
than a hint of his true powers. From this 
time on, however, he slowly began to take 
his place in the bigness and vastness of the 
sweeping development of the country; like 
a spring flood, a fresh stream of business 
enterprises burst forth when Lee surren- 
dered, and in all the years that followed 
Mr. Morgan is found progressing in the 
very centre of the current, bringing his per- 
sonality more and more to bear upon its 



BANKING DURING CIVIL WAE 51 

direction, and emphasising the growing 
tendency to cooperation which was destined 
eventually to characterise the total move- 
ment. 



CHAPTER III 

THE EAILROAD WRECKERS 

THE railway mania struck tlie country 
in '66, and it Avas in '69 that Morgan 
first ''got into" railroads. The achieve- 
ment which first attracted attention to 
him as a man of original capacity for deal- 
ing with very difficult railway problems, 
in such a way as to save railway properties 
from the predatory hands which, for some 
years after the close of the Civil War, had 
been occupied in wrecking railway proper- 
ties to make fortunes in the process, was 
the sensational Albany & Susquehanna Rail- 
way fight for control. 

It was primitive warfare with modern 
weapons. 

It involved a direct challenge to battle 
with two of the ablest and most unscrupu- 
lous of the men who had come to Wall 
Street, bent upon reckless manipulation. 

Mr. Morgan was of about the same 

52 



THE RAILROAD WRECKERS 53 

age as Jay Gould and a little younger than 
*' Admiral" Jim Fisk, alias the "Prince of 
Erie." Morgan had been occupied for ten 
years exclusively with the kind of bank- 
ing which private bankers were accustomed 
to follow. He had gained in that time a 
re]3utation for very conservative manage- 
ment and as a banker exceedingly sensitive 
to credit. It was then said of him that, 
except as a matter of record, it was not es- 
sential to put any promise or statement of 
his in writing. 

On the other hand, Gould and Fisk had 
gained notoriety for their brilliant daring, 
for their unscrupulous methods, and for 
the swiftness and ability with which they 
were able to wreck railroad properties. 
Furthermore, Gould was even then the best 
hated and the most greatly feared man in 
the Wall Street district. Black Friday and 
the Gold Corner were synonymous with his 
name. He was known to control two or 
three judges and to have reliable friends at 
court in New York and New Jersey. In the 
informal partnership between the two men, 
Fisk was always the one who did the fighting 
out in the public view, while Gould stood 



54 J. PIERPONT MORGAN 

back and pulled wires. The former had a 
genius for publicity and self-advertisement ; 
with his stout figure and florid complexion, 
his elaborate costumes and enormous dia- 
monds ; coachmen in glittering livery, showy 
drags, and gay women, he w^as the greatest 
newspaper character of his day. As boss of 
the Fall River Line of steamboats he felt 
entitled to wear an Admiral's uniform, and 
after he had set up the Erie offices in the 
Grand Opera House, strange and bizarre 
events took place; ballet girls and cham- 
pagne w^ere mixed up with railroad busi- 
ness in a wdld conglomeration in which the 
Erie's money was poured out in a golden 
flood. Fisk was murdered, finally, by a man 
with whom he had had a quarrel over the 
funds of a sugar refinery. 

The Albany & Susquehanna Railroad 
would have been a valuable prize for the 
Erie. It runs from the eastern extremity 
of the New York Central at Albany, to a 
junction with the Erie at Binghamton. At 
that time the Erie aspired to compete with 
the Central for New England business and 
had determined to monopolise the coal trade 
between that section and Pennsylvania; it 



THE RAILROAD WRECKERS 55 

only wanted the connecting link of 142 miles 
to make its position solid. Jay Gould se- 
cured a block of shares in the A. & S., and 
then began his characteristic strategy. He 
caused the road to be thrown into bank- 
ruptcy and had Fisk named as receiver. 
President Ramsey and the directors of the 
A. & S. saw what was going to happen to 
them and their road — they were about to 
be swallowed up. 

Very much frightened, Mr. Ramsey went 
to Samuel Sloan, who was the first president 
of the Hudson River Railroad, some ten 
years before Commodore Vanderbilt bought 
it — and begged to know what he should 
do. 

^'Why don't you see J. P. Morgan?" 
Sloan said. ^'Call him into consultation. 
He is not afraid of Jay Gould, and he can 
fight him without ever delivering a foul 
blow. If your road is to be saved to you, 
Morgan, I am sure, is the man who can 
do it." 

Acting upon this advice Mr. Ramsey and 
the directors visited Mr. Morgan. He was 
then only thirty-three years of age. But 
they were impressed immediately by the al- 



56 J. PIERPONT MORGAN 

most intuitive accuracy of his judgment. 
He said to them : 

^'I want a statement of your exact con- 
dition. I want a brief report which will 
tell me all that Gould and Fisk have done. 
I will examine these reports. Then I 
will let you know what I think about the 
matter." 

IWithin two or three days Mr. Morgan 
brought the directors together again. He 
said to them: 

*'In my opinion this matter will have 
to be fought out in the courts. I feel 
certain that it can be successfully fought 
there. Shall I go ahead?" 

Mr. Morgan was told to go ahead, as 
tersely as he had asked whether he should 
or not. He then retained as counsel his fa- 
ther-in-law, Charles E. Tracy, and Samuel 
Hand of Albany. They were sure of get- 
ting justice at the hands of Judge Rufus 
W. Peckham of the Supreme Court, who was 
sitting at Albany. Fisk and Gould were 
represented by David Dudley Field, and 
whenever they wanted anything, from an 
injunction to a receivership, they went to 
Judge Barnard, sitting in New York. 



THE RAILROAD WRECKERS 57 

A stockholders' meeting of the railroad 
was called to meet in Albany on a certain 
day. Two or three days before the date 
named, Mr. Morgan, with his lawyers, 
Tracy and Hand, worked unremittingly in 
the preparation of papers which must be 
presented to the Court in order to have a 
fair count made of the votes cast at the 
stockholders' election. They expected that 
Fisk and Gould would make some counter 
legal move. 

The night before the election^ Mr. Hand 
left Mr. Morgan at work in his room 
in the Delavan House making copies of 
the affidavits which were to be used on the 
application to be made by Mr. Hand be- 
fore Judge Peckham the next morning. 
Mr. Hand excused himself for a few min- 
utes to go down to the boat which was 
leaving for New York, in order to see 
a friend off. Hours passed and he did not 
return and Mr. Morgan began to fear 
foul play; but, in the early morning, Mr. 
Hand rushed in and told how he had gone 
on board the boat and had been accidentally 
carried off. He had begged the captain to 
put him ashore but could not prevail upon 



58 J. PIERPONT MOEGAN 

him to do so. Finally he got the captain to 
sell him one of the life boats. When it was 
paid for, the engines were slowed down, the 
boat was put over the side and he dropped 
into it and rowed to the shore. He saw the 
lights of a station some way off and after 
stmnbling over the railroad tracks arrived 
at the village of Hudson just in time to 
climb on board a train that was leaving for 
Albany. He got on the platform of a 
car and was about to enter it when he 
saw Jim Fisk inside with a carload of 
Bowery toughs. As he was known by sight 
to Fisk, he realised what would happen to 
him if he went inside the car and he rode 
all the way to Albany on the platform. 

With this advance knowledge that Fisk 
would try to capture the stockholders' 
meeting the next day and create a rough- 
house, Mr. Morgan not only perfected 
the legal steps necessary for a fair election 
but also made preparations to receive the 
delegation from the East Side in an appro- 
priate manner. 

When the hour for the election came, 
Mr. Morgan was standing at the head of 
the stairs leading to the meeting room. 



THE RAILROAD WRECKERS 59 

with President Ramsey, of the A. & S. 
Just before the meeting was to be called 
to order, Jim Fisk went up the stairs and 
a crowd of his followers were just about 
to enter the door from the street. Ramsey 
reached Fisk first and threw him down the 
entire flight of stairs into the middle of his 
advancing retainers. Fisk told Ramsey af- 
terwards that he was the kind of man he 
liked to meet ! 

When Fisk struck the pavement at the 
foot of the stairs the "boys" he had 
brought with him ran off without stopping 
to pick him up, but an angry policeman 
grabbed him by the collar, jerked him to 
his feet, and dragged him off to the police 
station. The officer merely shoved him 
through the door, however, and immediately 
disappeared. There being no one to make 
a complaint, Fisk was soon released. The 
"policeman" who arrested him was one of 
the company's hands, dressed up for the oc- 
casion. 

Fisk let the stockholders' meeting go Mr. 
Morgan's way. He wasn't the kind of man 
to stand on a mere technicality, and he de- 
cided promptly that if he couldn't run the 



60 J. PIERPONT MORGAN 

meeting he would at least run the road ; very- 
soon a ragged army of Fisk men went fly- 
ing over the rails of the Susquehanna in an 
Erie locomotive and two work cars, with or- 
ders to capture every joiece of rolling stock 
on the line. The Susquehanna sent out its 
gang to meet them and ripped up rails with 
reckless zeal. The service went to pieces, 
both sides undertaking to run trains and 
struggling for the right of way. On the ar- 
rival of the afternoon train at the peaceful 
village of Afton, under Erie management, 
"it was obliged to stop, as three rails had 
been removed by Superintendent Van Val- 
kenburg (Susquehanna). The citizens 
flagged the train for the safety of those on 
board or a great loss of life would have en- 
sued." These villagers were very bitter 
anti-Fisk men, but were not quite ready for 
bloodshed — as yet. 

Superintendent Van Valkenburg ordered 
all trains to stop where they were and an 
extra car was sent out with 150 men, under 
command of Master Mechanic Blackball, 
and accompanied by Henry Smith, legal 
adviser (!). The train arrived at Bam- 
bridge, Chenango County, late in the even- 



THE RAILEOAD WRECKERS 61 

ing, and laid over for further orders. 
Meanwhile the Erie raiders were advancing 
with an engine and car with about twenty 
men. They came leisurely up the road, dis- 
possessing the A. & S. men and putting Erie 
men in their places. 

Blackhall was in readiness. The Erie 
car came cautiously along the road, but 
not so cautiously as to avoid the trap which 
had been set for them. The Erie loco- 
motive was suddenly thrown from the 
track by means of a new patent frog. At 
the same time the Susquehanna train, which 
was lying on a side track, ran down be- 
hind the raiders and cut off their retreat. 
So all were captured and kept as prisoners 
by Mechanic Blackhall and the legal Smith. 

But these were preliminary skirmishes 
leading up to the big encounter. 

The Erie had 500 men at the tunnel a 
few miles from Binghamton, and held the 
station nearby. And the Albany party held 
the other end of the tunnel with about the 
same number. Just at dusk on an August 
afternoon the Erie captain determined to 
take the disputed tunnel. He put some two 
hundred products of the Bowery and neigh- 



62 J. PIERPONT MORGAN 

bouring streets on two cars, and, coupling on 
a locomotive, sent the train through the tun- 
nel. The train passed through the darkness 
in safety, but as it turned a curve at the 
mouth a train with the Ramsey-Morgan men 
on board was seen approaching — on the same 
track. The Erie whistle shrieked for down 
brakes, but the other train never slackened 
its speed. The engines crashed together 
gloriously, and the collision was the signal 
for the fight. The men spilled out upon the 
track and fell upon one another with sticks 
and stones and revolvers and matchless pro- 
fanity. After a time they got too much 
mixed in the darkness to fight any more and 
both sides drew back, taking with them the 
wounded and the drunken, and encamped 
beside the rails. 

From this time the thinly settled coun- 
try through which the A. & S. ran was in 
a state of war. The Metropolitan dailies 
sent their correspondents and the whole 
State looked on in wonder. While Fisk 
and Ramsey were fighting in the field, 
Gould and Morgan were shooting at each 
other wdth injunctions; twenty-two suits 
were begun in connection with this fight. 



THE RAILROAD WRECKERS 63 

Finding that Gould could best him in the 
use of such weapons and was continually 
aided by the so-called Erie judges at his 
back, Mr. Morgan made an adroit move 
which threw the case into the hands of Gov- 
ernor Hoffman, of the State of New York, 
and drew his opponents before judges who 
took the up-State view of the attempted 
seizure. The Governor had already threat- 
ened to run the road with the soldiers if the 
two parties did not end their differences. 
Morgan trapped Gould and Fisk into send- 
ing a written note to the Governor, stating 
that it was impossible for the contending 
parties to agree, that the railroad could not 
be run as matters stood, and requesting the 
State to appoint an official to take charge 
in the interest of public peace. The Gov- 
ernor appointed A. Bleecker Banks, of Al- 
bany, and close upon this action there fol- 
lowed a momentary calm. 

Mr. Morgan held a stockholders' meeting 
and a Board of Directors was elected. 
This new board empowered Mr. Morgan to 
lease the property. The meeting took place 
late in the day, and he at once rushed to New 
York to have the lease drawn and to com- 



64 J. PIERPONT MORGAN 

plete the arrangement before Gould could tie 
him fast with legal proceedings. He fin- 
ished the work that night and was back in 
Albany the next day with the lease, and be- 
fore the Gould-Fisk party could get in mo- 
tion the road was placed forever beyond 
their reach. The whole property was leased 
to the Delaware & Hudson Canal Company 
through LeGrand B. Cannon, who was 
then president of that system. 

The stock of the Albany & Susque- 
hanna, which had been selling around 18, 
jumped up 100 points; the stockholders 
received a guaranteed rental of 7 per 
cent, on their stock, which was afterwards 
increased to 9 per cent. ; and the employees, 
many of whom would have lost their posi- 
tions under a receivership, were enabled to 
keep their jobs. Mr. Morgan's construct- 
ive work in the railroad field had begun. 

This fight showed that a new force had 
come into the industrial world, a force 
which made for sound upbuilding as op- 
posed to stock gambling and the get-rich- 
quick idea. The older generation of bank- 
ers, completely outdone by the piratical op- 
erations of the Gould-Fisk type of financier, 



THE EAILROAD WRECKERS 65 

had always held aloof. Even Commodore 
Vanderbilt found them too much for him. 
Daniel Drew was bankrupted by his own 
kind. But Mr. Morgan plunged boldly in, 
met them on their own ground, and won a 
victory for his policy. He gives us, in this 
far-away year, a glimpse of the future Mor- 
gan, who is called the *' inevitable;" Fisk 
had declared at the beginning of this fight 
that he would have his way ''if it cost mil- 
lions of money and an unlimited number of 
men." 

Three years later Mr. Morgan was ap- 
proached by the Drexels of Philadelphia, a 
very rich and prosperous banking family, 
and asked to enter the New York branch of 
that house as a member of the firm. The 
connection insured him a position of influ- 
ence and power beyond anything he had yet 
reached. Consequently the firm of Dabney, 
Morgan & Co. was dissolved, and, in 1871, 
Drexel, Morgan & Co. began business. A 
plot of ground was bought at the corner of 
Broad and Wall Streets, and a white mar- 
ble building was erected at a cost of $1,000,- 
000 — the same solid structure which, no 
longer very white, but turned a dull grey 



66 J. PIERPONT MORGAN 

brown, and dwarfed by the surrounding 
high buildings, is the headquarters of the 
Morgan enterprises to-day. 



CHAPTER IV 

THE FIRST MOEGAN SYNDICATE 

THE year in which the firm of Drexel, 
Morgan & Company was formed, 1871, 
saw the birth also of the underwriting syn- 
dicate, the device which alone makes possi- 
ble the far-flung and reasonably certain op- 
erations of modern business. Jay Cooke, 
the Philadelphia banker, thought of it first, 
but he gained the idea from watching the 
evolution of the French syndicats. The 
first American sjTidicate was formed by 
Cooke to sell a part of an issue of five hun- 
dred millions of Government bonds. Mr. 
Morgan was not a party in this enterprise, 
but his actions and those of his associates 
left no doubt in Cooke's mind that he would 
have to let Mr. Morgan in upon the next oc- 
casion of the kind. 

The public was suspicious and doubtful 
in regard to the new financial instrument. 
It was hotly and eloquently lu-ged by some 

67 



68 J. PIERPONT MORGAN 

that the Government should sell its oAvn 
bonds over the counter and pay its commis- 
sion to the public instead of to a combina- 
tion of powerful bankers; the descendants 
of that anti-syndicate faction are demand- 
ing the same thing to-day. Meanwhile, 
underwriting sjTidicates — which a political 
orator of the seventies compared to a devil- 
fish and described as a stony-hearted relic 
of inhumanity — have prospered and multi- 
plied and taken over to themselves the 
launching of all great business undertak- 
ings. Mr. Morgan's career as a world finan- 
cier began in a syndicate operation, and is 
now culminating in a mighty domination of 
the whole field. 

The term underwriter implies the as- 
smnption of risk, of many risks, in point of 
fact, for, as used in finance it signifies the 
guaranteeing of a market for securities at 
a fixed price. There is always a contract 
under which the banker is bound to take an 
issue of securities at a specified time and 
price. If he can sell them to the public for 
more than he paid for them the profit is his ; 
if they must be kept for a time, or disposed 
of at a loss, the loss is his. In case only a 



FIRST MORGAN SYNDICATE 69 

few millions are involved, a single bank may 
finance the whole affair, but when a very 
large piece of business is offered — more 
than it is safe for an individual to handle — 
a syndicate will be formed to divide the risk. 

Participation in a syndicate is a privilege 
granted only to the firms whose influence 
will really widen the market and assist in 
assuring the success of the venture. The 
house which goes into an underwriting 
scheme prepares a contract in which every 
detail is arranged and specified, and this 
agreement is sent to each of the participants 
for acceptance and signature. There are 
seldom any refusals if a strong house has 
made the proposal, for to decline in allot- 
ment would result in self-elimination from 
the list for all future time. 

When Morgan is forming one of his giant 
combinations he puts his business friends 
down for the amounts which he thinks they 
should have — of the responsibility and of 
the profits. He doesn't ask them first. It 
has happened, notably in the case of the 
Atlantic Shipping Trust, that Mr. Morgan's 
associates had losses to make good instead 
of profits to fold comfortably away. No 



70 J. PIERPONT MORGAN 

matter. They go on leaving it all to him. 
It would not be a safe proceeding to pop 
up with an objection to any arrangement he 
has made. Once a capitalist went to Mr. 
Morgan on such an errand. He had found 
his name included in the syndicate backing 
a new scheme, and he ventured to suggest — 
quite casually — that the participation was 
not, in the present instance, altogether to his 
mind. Mr. Morgan was silent for a consid- 
erable space of time. It was so long before 
he said anything that the other began to 
talk about something else. But he found 
that Mr. Morgan was not listening — he was 
thinking — here was a man who had made 
fortunes out of the operations which he, J. 
P. Morgan, had originated. Lucky to have 
been let in; lucky, indeed, where there were 
others who almost pleaded for the privilege. 
Now he proposed to get up on his high horse 
and choose! . . . Why, this was the 
very deepest reflection upon the credit of 
the undertaking — the man was a contemp- 
tible bear at heart ! 

**You can stay out,'' said Mr. Morgan at 
last, stonily, ''but do not think that you will 
share with us again." 



FIRST MORGAN SYNDICATE 71 

When the paper is sent around for some 
charity, perhaps a church benefaction, Mr. 
Morgan, from force of habit, writes down 
the names of his friends, with the amounts 
opposite, which they are destined to con- 
tribute ! 

The habit of running things grew on him 
quite naturally; he became used to taking 
his friends in charge, as if they were not 
quite of age — which recalls something which 
happened to the late Bishop Potter. 

Bishop Potter was spending a Sunday 
afternoon with Mr. Morgan at the latter 's 
country place at Highland Falls. The vil- 
lage of Highland Falls is a way station on 
the West Shore Road, a few miles below 
West Point, and the fast trains pass it by 
without a stop on their first long jump away 
from New York. This is not a matter of 
much concern to the financier, who goes 
back and forth on his yacht; but on this 
occasion it troubled the Bishop. He was 
loath to travel on Sunday, but had an im- 
portant engagement to keep in the city that 
night, and he remarked that he would have 
to take a local train, which left a little while 
before supper. 



72 J. PIERPONT MORGAN 

"Oh, no," said the financier, "there's a 
train after that one. Of course, you'll stay 
to supper." 

"I don't see any train," objected the 
Bishop, "and I really must get to town in 
time to conduct an evening service." 

"There's an express," replied his host, 
disposing of the matter — "I'll have it 
stopped for you." 

An hour or so later, in the thick darkness 
of an autumn evening, Mr. Morgan took the 
Bishop in his carriage down the steep road 
to the railroad station. No lights shone 
from the building. The coachman got out 
and tried the door and rattled it. Then he 
came back and reported that the agent had 
gone home for the night. 

The sound of an approaching train was 
heard, faintly, but growing louder. 

"Break in the door," ordered Mr. Mor- 
gan, impatiently — "get a big stone and 
smash it!" He and his visitor got out of 
the carriage and looked on ; finally the door 
gave way. Mr. Morgan went inside, and 
after scratching a number of matches, found 
a lantern and lit it. "All right. Bishop!" 
he called cheerfully, "come ahead," and he 



FIKST MORGAN SYNDICATE 73 

walked out to the middle of the track and 
waved the light. 

With a horrid screeching and squeaking 
the train stopped. It was a freight ; a very 
long freight. Out of the cab leaned the sur- 
prised engineer, and from the caboose some- 
where in the far-away darkness the con- 
ductor came running up, very angry. 

''What do you mean by stopping this 
train?" he demanded fiercely. 

Mr. Morgan, still holding the lantern, told 
him who he was. 

''I don't care a whoop-in-blazes who you 
are (the conductor's language here becomes 
unprintable) , you've got no business — why," 
he choked, "there's an express train fol- 
lowin' us — ^you'll have a collision — !" — but 
Mr. Morgan paid no more attention to him 
or his remarks. 

''All right, Bishop," he was saying gen- 
"tly? *'you get right in the caboose and ride 
to New York." 

Which the Bishop did. 

Jay Cooke, the great Philadelphia banker, 
held much the same position in the eyes of 
his countrymen a generation ago that Pier- 
pont Morgan holds to-day ; he was the same 



74 J. PIERPONT MORGAN 

sort of filial authority in matters financial 
and had proved the mainstay of the Govern- 
ment during the whole of the Civil War. 
Cooke himself had a remarkable genius for 
advertising; he could Barnumise a bond is- 
sue and sell securities in a desert; and he 
began to take it for granted, after years of 
uninterru23ted success, that he had a mono- 
poly and would never have a rival on the 
American continent. A few^ years after the 
War, Congress passed an act authorising 
the refunding of five hundred millions that 
had been borrowed to pay the cost of the 
struggle ; the proposal was to save the pay- 
ment of mterest by exchanging the 6 per 
cent, bonds for fives. In '71 Jay Cooke 
managed to place a portion of this new issue, 
the public entering into the scheme with a 
good deal of reluctance; most of the new 
bonds were placed abroad. Two years later 
Secretary of the Treasury George S. Bout- 
well announced another bond sale and called 
upon the bankers for proposals. 

Now the fat w^as in the fire. From the 
press there came a stiff and angry opposi- 
tion ; Jay Cooke's rivals went down to Wash- 
ington and carped at the sjoidicate idea, his 



FIRST MORGAN SYNDICATE 75 

enemies getting the ear of President Grant ; 
and, furthermore, the firms of Morton, Bliss 
& Co., and Drexel, Morgan & Co., through 
Morton and young Morgan, organised a new 
syndicate to take the bonding business away 
from Cooke. The Ways and Means Com- 
mittee held public hearings and became a 
political storm centre. 

Mr. Morgan's old employer, William 
Butler Duncan, told the committee that 
while he had taken no part in the syndicate 
of 71, he felt that ''it was a very doubtful 
operation as to its success, that there were 
periods during the pendency of the syndi- 
cate when it was exceedingly doubtful 
whether it could be carried to a successful 
termination. I doubt very much whether 
In the present condition of the markets of 
the world another effort in the same direc- 
tion would be as nearly successful as that 
one has been. ' ' Mr. Duncan advocated call- 
ing upon the public for subscriptions. 

Levi P. Morton, who was spokesman for 
the new syndicate, was heard before the 
committee on the day following, and replied 
flatly to Duncan: ''Some gentlemen have 
argued that the Government should wait for 



76 J. PIERPONT MORGAN 

buyers to come to the Treasury Department 
for the conversion of their bonds; in my 
opinion the Government would have to wait 
for a long time before it would make any 
conversion of 6 per cent, bonds into 5 per 
cent, bonds.'* 

Morton said he proposed to become a 
member of the next syndicate; this calm 
insistence of the Morgan crowd was in- 
furiating to Jay Cooke. The Morgan party 
included, besides Morton's American and 
London firms, Mr. Morgan's New York and 
London firms and the Barings, and pro- 
posed to take either a hundred millions or all 
of the remaining three hundred millions of 
the 5 per cent, bonds. Cooke's friends went 
directly to Boutwell and told him that it 
would be an unpardonable outrage and a 
grievous blunder to do this work through 
any other party, and his friend Senator Cat- 
tell, of New Jersey, wrote to him from 
Washington that the Morton-Morgan pro- 
posal was a thing ''that can't be done and 
shall not be done." 

A smile went around at the position Cooke 
found himself in, and at the ridiculous pro- 
crastination and timeless debates in the 



FIRST MOHGAN SYNDICATE 77 

Ways and Means Committee room. '^Pray, 
what is a syndicate?" was asked in news- 
paper doggerel: 

' ' Pray, what is a syndicate 
Intended to indicate? 

Is queried abroad and at home. 
Say, is it a comer, 
Where Jay Cooke as Horner 

Can pull out a very big plum ? ' ' 

Boutwell told the Ways and Means Com- 
mittee that unless they adopted some resolu- 
tion pro or con he would take their failure 
as an indorsement of his course in placing 
the first instalment of the loan. The com- 
mittee then adopted a resolution that it 
would not adopt a resolution! Boutwell 
felt that his course was reasonably clear, 
and he divided the loan equally between the 
Jay Cooke syndicate, composed of Cooke 
and the Rothschilds, and the Morgan syndi- 
cate of banking interests. 

The refunding bonds were successfully 
sold, although not without difficulty, the 
only advantage which they offered to buy- 
ers to compensate for the lessened income 
being greater permanency than the sixes, 
which could be called in at any time. 



78 J. PIERPONT MORGAN 

These were j^ears of revulsions and panics 
in the business world, overtrading and spec- 
ulation were rife, and the paper currency, 
already too large, gave speculators and cap- 
italists the power to combine together and, 
by a forced locking up of paper, to create a 
squeeze. Three hundred and fifty millions 
of United States notes had been issued 
simply as a war measure, and the true inter- 
ests of commerce demanded (the war neces- 
sities having ceased) that these millions be 
slowly and surely reduced to specie value. 
Gold was then at 10 to 15 per cent, premimn. 
The great agitation was for the resumption 
of specie payments, which the business 
world felt had to come before the country 
could do business on the scale of its real 
needs. 

Mr. Morgan went to Europe about the 
time of the Presidential election of 1876, 
and he was impatient with the men of 
finance he then met in London, because they 
were expressing some doubt about financial 
conditions in the United States. They told 
him that the agitation in Congress and in 
many parts of the country for a very large 
use of silver in our currency system was 



FIRST MORGAN SYNDICATE 79 

leading many Americans to turn a portion 
of their possessions into money with which 
they were buying foreign exchange. 

''What of it?" said Mr. Morgan. 

''Why, they are using this exchange to 
buy our Consols, and that shows that they 
are afraid that there will be serious conse- 
quences to your currency on account of this 
silver legislation." 

"But the credit of the United States 
should be higher to-day than it ever has 
been. Within a few years we are going to 
resume specie payments, ' ' insisted Mr. Mor- 
gan. 

In this way and in constant intercourse 
with the great capitalists and financiers of 
Great Britain, Mr. Morgan did something to 
overcome the lack of confidence in National 
credit which had for some time prevailed. 
That he was able to do this is evidence of the 
esteem in which he was held and the faith 
that was put in his statements. 

Yet the indications were strong that in 
the United States, at least, the credit of the 
Government was greatly impaired. An- 
other large issue of bonds, this time bearing 
4 per cent, interest, was less favourably re- 



80 J. PIERPONT MORGAN 

ceived by the American people than any 
issue since the early days of the War. The 
only market for these bonds that could be 
obtained was brought about through selling 
them below par. 

The Government turned to Mr. Morgan 
at this juncture. He and August Belmont, 
together with the Rothschilds, made prep- 
arations in the early part of 1878, one year 
before the resumption of specie iDayments, 
to float the major portion of the new Ameri- 
can loan. 

Mr. Morgan, in every way possible, had 
brought to the attention of English capital 
the strength of our Government, and had 
persuaded that capital that our bonds would 
be protected absolutely by the Government, 
and that every condition nominated in the 
bonds would be fulfilled. This was a kind 
of missionary work, for which Mr. Morgan 
was probably the best qualified of American 
bankers. He overcame the doubts that lin- 
gered in some quarters of England respect- 
ing the intention or ability of the American 
Government to resume specie payments on 
January 1, 1879, and showed how the step 
was prepared for. 



FIRST MOEGAN SYNDICATE 81 

*' There won't be any necessity to resume 
formally," he said, "because resumption 
will be actually in progress almost sponta- 
neously six months before the date fixed by 
law." 

By missionary work of this kind, confi- 
dence, and a resulting market for these 
bonds, was secured. Within three months 
Mr. Morgan and the Rothschilds, through 
Mr. Belmont, had purchased and marketed 
fifty millions, and within six months one 
hundred and fifty millions more. They 
passed these bonds on to customers and in- 
vestors in England and in the United States, 
and the market price for them appreciated 
so rapidly that the syndicate is understood 
to have sold the bonds at an advance over 
their purchase price from 1 per cent, early 
in the transactions to 4 per cent, at the 
end. 

This negotiation brought Mr. Morgan's 
banking house into world-wide reputation. 
It was said by one cynic at the time that, of 
course, with the Rothschilds back of him, 
Mr. Morgan was in a position to finance this 
great transaction. The answer to that 
might have been, "How did he get the Roths- 



82 J. PIERPONT MORGAN 

childs back of him?" But it was not true 
that the Rothschilds were back of him, for 
the syndicate membershij^ stood upon an 
equality. 



CHAPTER V 

THE RESCUE OF VANDERBILT 

THIS syndicate transaction has always 
been regarded as one of the greatest 
achievements in the way of financing a Na- 
tional loan. But an enterprise in which 
Mr. Morgan was exclusively engaged soon 
after attracted keener attention to him as an 
individual, for the reason that it represented 
an entirely new and original venture for an 
American financier. 

William H. Vanderbilt had succeeded his 
father in the absolute control of the New 
York Central Railway Corporation in 1876. 
It was known that Mr. Vanderbilt 's au- 
thority over the New York Central was 
based upon the fact that he was the owner 
of the greater part of the stock. There be- 
gan to be heard criticisms of this one-man 
power in a great railway system. It is now 
possible to explain for the first time in print 
what the reasons were which impelled Mr. 

83 



84 J. PIEEPONT MORGAN 

Vanderbilt to take a step which is one of the 
landmarks in the history of American fi- 
nancing. 

The Legislature at Albany began to im- 
pose heavy taxation, not so much upon Mr. 
Vanderbilt himself as upon the New York 
Central property. The reason given for 
this was the fact that the property was in 
practically the exclusive ownership of one 
man. There were intimations that taxation 
of this kind would be increased from time 
to time, and Vanderbilt became very 
much frightened. He consulted with some 
friends in whose judgment he had confi- 
dence. He informed them that if he could 
discover a way by which he could scatter a 
considerable part of his holdings of New 
York Central stock he would certainly act 
upon it. 

"But I cannot offer the stock in open 
market," Vanderbilt said. *'To do that 
would cause great depreciation in the 
market value of the stock. It might, in 
fact, precipitate general demoralisation and 
bring about a panic." 

Mr. Morgan's name was suggested to Mr. 
Vanderbilt in connection with this matter. 



THE RESCUE OF VANDERBILT 85 

Mr. Vanderbilt merely knew of Mr. Mor- 
gan, through Morgan's association with the 
Drexels, who were in a sense the fiscal 
agents of the Pennsylvania Railroad Com- 
pany. That, however, would not of itself 
explain the determination of Mr. Vander- 
bilt to summon Morgan and place the diffi- 
cult proposition before him. The fact was 
that he had been greatly impressed by Mor- 
gan's marketing of Government bonds in 
England, and shortly after this the two men 
met at Vanderbilt 's invitation. The owner 
of the New York Central said : 

**Mr. Morgan, the New York Central is 
in grave danger, through the disposition of 
the Legislature and to some extent of the 
City of New York, to impose excessive taxa- 
tions upon it. Unless this disposition is 
checked the consequences will be serious, 
and force the road to go into bankruptcy. 
Something must be done, and quickly. The 
property is attacked in this way chiefly be- 
cause I am regarded as almost the exclusive 
owner of it. I do not see any way of put- 
ting an end to this danger, except by market- 
ing a very large part of my stock holdings. 
I want you to tell me how it can be done." 



86 J. PIERPONT MORGAN 

In reply Mr. Morgan spoke confidently of 
the New York Central property, expressing 
the opinion that it was capable of greater 
expansion and largely increased earning 
capacity. He was certain that his friends 
in England had a high opinion of the prop- 
erty, and in his view any amount of the 
Vanderbilt stock which Mr. Vanderbilt was 
willing to part with could be privately and 
without the knowledge of the public passed 
over to English investors. "How^ much 
stock," he asked, *'are you ready to 
sell?" 

Vanderbilt said that he owned 87 per 
cent, of the entire capital stock of the Cen- 
tral, and that he was willing to part with 
so much of it that it could not be said that 
he w^as the owner of a majority of the stock. 

Morgan gave his answer almost u^Don the 
instant. He was certain, he said, that he 
could dispose in England and in private, not 
using customary stock market methods, of 
all the stock that Mr. Vanderbilt wanted to 
dispose of. Furthermore, he was confident 
that he could pass this stock over to invest- 
ors at practically the market price, which 
was then about 130. 



THE RESCUE OF VANDERBILT 87 

The agreement was made in the course 
of a few days, although, of course, it took 
some time to arrange for some of the de- 
tails. Aside from Mr. Vanderbilt and Mr. 
Morgan and perhaps one other person, no 
one had the slightest suspicion or hint that 
a transaction of this kind was under way. 
Nor is it to this day known, excepting to the 
parties themselves, who among the great in- 
vestors in England bought the stock. 

Not until the stock had passed from Mr. 
Vanderbilt 's ownership to that of the Eng- 
lish investors was it known that Mr. Van- 
derbilt had sold a block of New York Cen- 
tral stock of twenty-five millions par value 
through Mr. Morgan to English investors. 
That fact was purposely made public. The 
purpose that lay behind was achieved. At- 
tempts to tax excessively the New York 
Central ceased, but Mr. Vanderbilt 's mo- 
tives were misconstrued. The common im- 
pression was that, being fearful of the fu- 
ture of the New York Central, he deter- 
mined to convert a large part of this portion 
of his holdings in the stock into Government 
bonds. Another motive widely attributed 
to him was a desire somewhat to scatter his 



88 J. PIERPONT MORGAN 

holdings so that he would escape the charge 
of being the exclusive one-man power. 

For his part Mr. Morgan had achieved an 
unprecedented thing in American finance. 
England and the continent of Europe had 
for some years been furnishing capital for 
American railways, but this was chiefly 
done in the way of loans or through the se- 
curity market methods. There had never 
been a large outright sale direct to English 
investors of American railway securities be- 
fore. Mr. Morgan then obtained the right 
to vote the proxies of the English holders of 
Central stock, and holds that privilege to 
this day. 

J. P. Morgan was slowly becoming known, 
not widely or through the newspapers, but 
among various groups and circles. The 
soldiers of the regular army, for instance, 
knew little of New York bankers, and of Mr. 
Morgan least of all, but in the year 1877 
they became aware of his existence all of 
a sudden. In that year there was an insti- 
tution which to-day the army knows not of. 
It was called the j^osse commitatus^ and was 
in demand chiefly in the Southern States 
during the days of carpet-bagging. Under 




J. PIERPONT MORGAN AT THE AGE OF FORTY 



THE RESCUE OF VANDERBILT 89 

the posse commitatus it was possible for the 
civil authorities to call upon the military at 
any time or place to keep order and make 
arrests, and the thing was being put into 
very plentiful use at the polls on election 
day. The South finally became so much 
enraged that her Congressmen at Washing- 
ton held up the Appropriation bill ordinar- 
ily passed for the pay of the regular army. 
For nearly a year the soldiers received pay 
checks, which were perfectly useless, as 
there was no money with which to cash 
them. This applied, of course, to every sol- 
dier in the Union, from the garrison posts 
in the East to the fighting bodies on the 
plains. 

General Miles was fighting the Nez Perces 
wars out in the Yellowstone; it was tough 
fighting and hard riding, which brought the 
men back to civilisation without seats to 
their trousers, with terrible appetites, and 
not a cent to buy food for themselves or 
their horses. There was only the Jew 
money-lender, offering to accept the pay- 
master's checks at a discount of 25 per cent. 
— and wailing about the risk. 

Driven by necessity the officers and men 



90 J. PIEEPONT MORGAN 

were slowly making up their minds to part 
with $25 out of every hundred that right- 
fully belonged to them, when news came that 
J. P. Morgan, of Drexel, Morgan & Co., had 
provided the cash to pay all of the army 
salaries inmiediately and at discount which 
would barely pay the cost of the proceeding 
■ — namely, 1 per cent. 

To those veterans this action of Mr. Mor- 
gan's is undoubtedly the greatest thing he 
ever did or ever will do. 

With one of the social and political or- 
ganisations which had grown out of the di- 
vided public opinion in the North during 
the War, Mr. Morgan now become asso- 
ciated. This was the Union League Club, 
which had been organised in '63, with the 
primary object of aiding the Government 
in its efforts to suppress the Rebellion; the 
test qualification for membership was abso- 
lute and unqualified loyalty to the Lincoln 
administration. Mr. Morgan was elected a 
member of this club early in the seventies, 
and the fact is interesting as showing what 
his politics were at bottom. For the rest 
he never talked politics with any zest for the 
subject. 



THE RESCUE OF VANDERBILT 91 

It happened some twenty-five years later 
that several members of the club were of the 
opinion that the institution would do itself 
honour by electing Mr. Morgan president. 
He was informed that if he would allow 
himself to be a candidate he would be unani- 
mously elected. 

''No," said Mr. Morgan, shaking his head 
kindly, but emphatically, "No, you must 
find some other candidate." Had he been 
willing to accept he would have joined a line 
of distinguished men, the New York mer- 
chant, Robert B. Minturn; the diplomat, 
John Jay; Joseph H. Choate; Hamilton 
Fish, who had been Governor, United States 
Senator, and Secretary of State; William 
M. Evarts, Chauncey M. Depew, Gen. Hor- 
ace Porter, and Elihu Root. But distinc- 
tion of that kind did not appeal to Mr. 
Morgan. 

Yet when representatives of the Board 
of Trustees of Columbia University ap- 
proached him, somewhat diffidently, to ask 
if he v^ould accept election as trustee of 
the University, they were gratified to see 
that Mr. Morgan appeared to feel keenly 
appreciative of the offer, saying: "I 



92 J. PIERPONT MORGAN 

should feel it an honour." That, however, 
was his attitude towards many of the edu- 
cational and philanthropic institutions of 
the city. Any honour that seemed to have 
direct or indirect association with politics he 
looked upon as of no consequence. But to 
be associated in the direction of a philan- 
thropy or an important educational institu- 
tion like the Museum of Natural History 
or the Metropolitan Museum of Art, seemed 
to be the only honour for which he cared in 
the slightest degree. 

For ten years and more after the close of 
the War the American railroads suffered 
from the inroads of the stock jobbers. It 
has been related how Gould and Fisk tried 
to steal an up-State line and how Mr. Mor- 
gan blocked their movements ; there was now 
growing up a new idea in financial freeboot- 
ing by the side of which the Gould-Fisk 
operations seem almost petty. This was the 
organisation of syndicates to build compet- 
ing lines. This was far worse than stock 
jobbing. The evil a stock jobber does dies 
with him, but a competing railroad for 
which there is no room on the face of the 
earth, which is simply a senseless excres- 



THE RESCUE OF VANDERBILT 93 

cence, built to bleed an established line, lives 
forever, and is a permanent evil. Like the 
Erie, its history becomes an endless series 
of reconstructions. The roads it parallels 
may have been good solid properties, as the 
New York Central and the Lake Shore were 
when attacked by the unlooked-for competi- 
tion of the West Shore and the Nickel Plate. 
They may have paid regular dividends and 
found a ready market for their shares as 
well as their bonds among people who would 
never buy a speculative security. But 
along comes a wildcat line and changes 
everything; railroad wars break out, rates 
are cut down within an inch of ruin, trains 
begin to run half empty, the company's 
credit weakens fast, a sound and healthy in- 
stitution goes into a decline. 

The excitement and risk of these large 
and piratical operations appealed to strenu- 
ous and eager business men, and on all sides 
the railroads, which had only begun to feel 
themselves solidly established, were beset by 
unscrupulous and dangerous competition. 
The Nickel Plate duplicated the Vanderbilt 
system from Buffalo to Chicago and Van- 
derbilt, impulsively and in great alarm took 



94 J. PIERPONT MORGAN 

it off the hands of the promoting syndicate 
before it was finished. 

The West Shore Railway System was 
planned in the late seventies by a relatively 
new group of men. One was Commodore 
Winslow, a name now forgotten by the 
13ublic. Into some association with the pro- 
moters came Gen. Horace Porter. These 
promoters purposed constructing a rail- 
road from a point opposite Forty-second 
Street, New York City, along the right bank 
of the Hudson River, upon the left bank 
of which ran the New York Central. The 
Hudson River divided the two systems as 
far north as Albany. Then it was planned 
to continue the railroad from Albany to 
Buffalo, paralleling the Central for prac- 
tically the entire distance, so that the tracks 
of one system could be seen from the other. 

Soon after the road began operations, it 
began to cut rates, in order to draw away 
business from the Central. Its rates were 
so low that it did cut very heavily into the 
Central's traffic; the rates were put down 
and down until the West Shore was running 
at such a loss that it had to be placed in the 
hands of a receiver, and the Central was 



THE RESCUE OF VANDERBILT 95 

approaching bankruptcy. Mr. Vanderbilt 
and President Chauncey M. Depew sought 
in vain for a way out of their dangerous 
situation. 

What was being done to the New York 
Central was duplicated in other quarters. 
Most of the roads were an amalgamation of 
short lines more or less loosely put together, 
averaging not more than forty or fifty miles 
apiece. They were loaded down with debt 
and menaced by vicious and deadly compe- 
tition, which they returned in kind. The 
railroad situation in the early eighties was 
getting to be very like bedlam, with bank- 
ruptcy at the end of the chapter for many, 
— for the just as well as the unjust. 



CHAPTER VI 

RAILROAD CHAOS AND BVIN 

EARLY in June of the year 1885, J. P. 
Morgan returned to New York from 
his customary trip to London and the Con- 
tinent. In this simple statement of fact 
there is nothing to excite one. Neverthe- 
less, it is true that, on this occasion, Mr. 
Morgan 's arrival upon his native shore was 
an event of great importance. It marked 
the beginning of a movement to end compe- 
tition between railroads, the giving of a new 
set of commandments to big business enter- 
prises: Don't fight each other, don't waste 
the strength of one another, stand together 
and divide the profits which will assuredly 
be yours. 

The phenomenal year of 1880, during 
which a succession of good crops in America 
and bad crops in Europe had expanded the 
railroad business to Gargantuan propor- 
tions, saw the spirit of speculation run mad. 

96 



RAILROAD CHAOS AND RUIN 97 

In two years twenty-nine thousand miles of 
new lines were laid down, an addition of 
thirty-four per cent, to the mileage of the 
country. Of these new railroads, about one- 
third were justified by the existing demand, 
one-third more would become useful at some 
time in the future, and the others would 
never be of any value to anyone, except, per- 
haps, to the promoters, if they succeeded in 
selling out. 

The first railroads were local lines radiat- 
ing from large cities and towns, and the 
process of building up the leading systems 
had been always a process of combining local 
roads into important and serviceable trunk 
lines. Once you travelled from Albany to 
Buffalo over the Albany & Schenectady, 
Schenectady & Utica, Utica & Syracuse, 
Syracuse & Auburn, Auburn & Rochester, 
and Rochester & Buffalo railroads. These 
fragments of roads had been made a part of 
the New York Central, which was originally 
a consolidation of eleven railroads. S,imi- 
larly, the Pennsylvania had been formed 
out of a multiplicity of lines southwest of 
New York. Such combinations returned 
huge profits, because the business of the 



98 J. PIERPONT MORGAN 

consolidated roads increased in much larger 
j)roportion than did the cost of financing 
and operating the additional mileage. 

The owners of these new lines were in a 
position of vast strategic advantage; they 
were the only ones who could supply a nec- 
essary service to their countrymen. Their 
terminal facilities, cars and engines, lines of 
rail, could not be duplicated except at an 
increased cost ; apparently they had nothing 
to do but to lie comfortably in the centre of 
a stream of prosperity and receive the good 
things floating down to them. 

True, they had sometimes to fight for 
their share. Pooling agreements were in- 
vented, for the purpose of making such bat- 
tles much less frequent and less bloody. 
Things went along smoothly enough until 
the idea of building parallel lines was not 
merely conceived, but put in action. This 
was a thing which, by every rule of good 
busmess, was theoretically impossible. 
From the viewpoint of economists it simply 
couldn't happen; the axioms forbade. Yet 
it came to pass. 

The theory of competition contains the 
assumption, accepted for a century, that 



EAILROAD CHAOS AND RUIN 99 

when the returns from an undertaking fall 
below the cost of service, competition will 
come to an end. According to the school 
books no railroad could afford to carry 
freight and passengers for less than cost, 
and would not attempt to do so. And as the 
big established lines knew that they were 
in a position to provide a service more eco- 
nomically than any newcomer could furnish 
it they did not fear competition. But the 
worthy theory failed in the case of the rail- 
roads. 

To make money out of the building of a 
railroad it was only necessary to produce a 
small sum to pay for a charter, with the 
right to issue first mortgage bonds. The 
original subscribers then would have the 
disposal of w^hatever funds the bondholders 
might provide. Out of this handsome pile 
they could pay themselves a good commis- 
sion for selling the bonds, or form a con- 
struction company and contract to pay 
themselves anything in reason or out of 
reason for building the road. The bond- 
holders' money flowed into their pockets as 
directors and as contractors. As a means of 
becoming rapidly rich, building railroads 



100 J. PIERPONT MORGAN 

was better than patent medicines, and made 
the saving philosophy of Ben Franklin 
hopelessly out of date. 

Often the money came out of the stock- 
holders of rival lines, and the system of re- 
ceiverships which was originally intended to 
furnish protection to the investors was used 
continually to further schemes which, if not 
wholly unscrupulous, were at least nothing 
better than gambling with the prosperity of 
established enterprises by forcing competi- 
tion to a point where there was nothing but 
bankruptcy in store for all, the sound as 
well as the unsound. Insolvent themselves, 
these speculative railroads had nothing to 
lose and much to gain by dragging their 
competitors down to their level. 

It is obvious that when one railroad in a 
territory reduces its charges all others in 
the same section must immediately follow 
suit, for the simple reason that even if a 
railroad's business shrinks to almost noth- 
ing its regular and heavy expenses continue 
about the same. It can better afford to 
carry freight for half the cost of service 
than not to carry it at all. 

In the chaos of railroad affairs that fol- 



RAILROAD CHAOS AND RUIN 101 

lowed, the public was terribly in the dark 
as to what was going on, terribly in danger 
of losing money on its investments in rail- 
road securities — and terribly pleased at the 
abrupt cheapening of freight rates. The 
big owners fought out their battles without 
caring a pin who was helped or hurt. W. 
H. Vanderbilt, of the Central and the Lake 
Shore, had followed his father's policy up 
to this time; he never sold his stocks if he 
could help it, and was always ready to sus- 
tain his properties in the market. 

Therefore, the investors who looked up to 
him were rudely shocked when he became 
the leader in a ruinous war of east-bound 
freight rates which depressed the value of 
all railway securities. This war had been 
begun against the Erie, to take away some 
of its grain traffic, but after the building of 
the Nickel Plate, which paralleled Vander- 
bilt 's Lake Shore, it was carried on with a 
deeper purpose, that of throwing the Nickel 
Plate into bankruptcy. The contest was 
carried on with the greatest bitterness and 
energy and a culminating point was reached 
when Vanderbilt angrily left a meeting of 
trunk line presidents, at which attempts had 



102 J. PIERPONT MORGAN 

been made to end the fight; he rejected ev- 
ery plan of adjustment advanced. For a 
while, in the subsequent meetings in the 
Pool Commission's office, the only repre- 
sentative present from the Vanderbilt roads 
was a subordinate officer of the Michigan 
Central. 

But Vanderbilt could not stand out like 
this indefinitely ; it was costing everyone too 
much, including himself. Eventually he 
bought the Nickel Plate. He did not know 
that the road was on the verge of collapse ; 
if he had waited two months, or even six 
weeks, he might have obtained it for a small 
part of the price he actually paid. He never 
forgot this experience, and when the West 
Shore sprang up as a rival of the Central, 
Vanderbilt held off and played a waiting 
game. 

All attempts to settle the difficulties of 
the trunk lines only made them more an- 
tagonistic. The roads themselves seemed 
to have given up all intention of reorgan- 
ising the pool or trying to maintain rates; 
railroad experts began to urge the passage 
of legislation to prevent competition from 
becoming ruinous. The New York Cen- 



EAILROAD CHAOS AND RUIN 103 

tral, having carried its fight to the point 
where the receiver of the West Shore could 
borrow no more money, was not disposed 
to make peace until its rival was thoroughly 
crushed. The Lackawanna and the Erie 
were having a similar conflict, their lines 
running almost in sight of each other all 
the way from Binghamton to Buffalo. The 
Baltimore & Ohio had invaded the Penn- 
sylvania's territory and was completing its 
line from Baltimore to New York. Van- 
derbilt's South Pennsylvania was pushing 
out parallels to the main line of the Penn- 
sylvania; his invasion of the Pennsylvania's 
Clearfield bituminous region was perhaps 
the bitterest drop in the cup. All the roads 
had made low-rate freight contracts run- 
ning a long time ahead, they had chopped 
passenger rates, and so great was the demor- 
alisation that it did not seem possible that 
any resolutions or meetings of presidents 
could settle the difficulties. 

This was the situation when Mr. Morgan 
returned from Europe in June, 1885. He 
brought back with him a store of vivid im- 
pressions, definitely unpleasant, even bitter. 
American railroads had a very bad name on 



104 J. PIERPONT MORGAN 

the other side; "unscrupulous competi- 
tion," "loose accounting," "barbarism," 
"folly," "infamous speculation," were the 
words and phrases oftenest associated with 
our railroads. One of the historic British 
monthlies reviled our industrial leaders un- 
der the caption, "Freebooters of American 
Finance." 

The situation aroused Mr. Morgan. Al- 
though he was not a railroad man in any 
sense — he had always been a banker — he 
could sit by no longer, for the interests he 
represented and all his life had represented 
were being sacrificed. "I made up my 
mind," he said, "that something should be 
done." 

The West Shore and the South Pennsyl- 
vania were the two most pronounced "sore 
spots" — to use Mr. Morgan's expression; 
and as the settlement of their difficulties was 
a necessary prelude to any lasting arrange- 
ment among the trunk lines, he took hold 
of those two cases, directly and with charac- 
teristic determination. 

The South Pennsylvania was only a 
projected line, partially completed, but the 
(West Shore had been in active operation 



RAILROAD CHAOS AND RUIN 105 

for some time, and liad recently struck bot- 
tom. This road had grown out of the con- 
nection of a few individuals with the New 
York, Ontario & Western, which had ten 
miUion dollars in its treasury at the time. 
Charles T. Woerishoffer, a member of the 
New York Stock Exchange on the bear 
side, Gen. Edward F. Winslow, railroad 
engineer, and Gen. Horace Porter, its pro- 
moters, were in absolute control of three 
corporations — the Ontario & "Western, the 
North River Construction Company, and 
the West Shore. With its ten millions the 
Ontario & Western bought bonds of the 
West Shore, and in this way the first im- 
portant financing was made possible. Af- 
terwards John Jacob Astor, D. O. Mills, and 
several other prominent capitalists took up 
the bonds, until at last forty millions had 
been issued. It was planned to parallel the 
New York Central for the entire distance 
from New York to Buffalo, so that the 
tracks of one line could be seen from the 
other. 

It was argued by the promoters that 
by adopting the same route as the Central 
via the Hudson and the Mohawk valleys, the 



106 J. PIERPONT MORGAN 

new road would have tlie advantage of low 
grades ; the construction was to be first class, 
yet the cost light, and the bonded indebted- 
ness and stock of the road was limited to 
seventy millions, so small a sum compared 
with other trunk lines, particularly in com- 
parison with the watered millions of the Cen- 
tral, that in making rates for business the 
new road would have the advantage. The 
public swallowed this, and subscribed liber- 
aUy. 

Within two years the real facts came out ; 
the public learned that the contract between 
the West Shore and the Construction Com- 
pany was wholly to the advantage of the 
latter. The truth was that the terms of this 
contract left the railroad hopelessly bank- 
rupt. The construction of 373 miles of 
double track and thirteen miles of single 
track under its terms called for nearly sev- 
enty-six millions, while the West Shore had 
but forty millions of bonds and thirty mil- 
lions of stock, and the available assets were 
still less. As the work proceeded the cost 
mounted by leaps and bounds, and the debts 
also. No fewer than two hundred and fifty 
lawsuits were brought against the road and 



RAILROAD CHAOS AND RUIN 107 

claims of all kinds were showered upon 
it. 

The management sought desperately for 
some means of getting the road upon its 
feet. Rates were cut so low, that, although 
the traffic the road received injured the Cen- 
tral, it did not benefit the West Shore. In 
default upon its interest, in an incomplete 
condition, never earning money enough to 
pay its operating expenses, the road was 
placed in the hands of a receiver in the 
spring of '85. In order to pay expenses the 
receiver was obliged to issue certificates, 
and, with the fierce rate-cutting keeping 
the income down, new issues of certifi- 
cates piled ujD imtil the road was being oper- 
ated at a cost of one himdred and forty- 
five per cent. Of course this meant not 
merely bankruptcy, but utter annihilation. 
The Central was earning a bare one per cent, 
on its stock. It had come down mightily 
and was travelling straight toward a condi- 
tion of insolvency ; its whole fate hung upon 
the question of the amount of money the 
West Shore might- be able to borrow. 

Of course, everyone looked toward Mr. 
Vanderbilt. He was expected to buy the 



108 J. PIERPONT MORGAN 

West Shore, but Vanderbilt, remembering 
his ex]3erience with the Nickel Plate, hmig 
back ; he was not in a hurry. Moreover, he 
had his South Pennsylvania on his hands, 
and this road stood in exactly the relation 
to the Pennsylvania that the West Shore 
did to the Central. 

The president of the Pennsylvania at that 
time was George H. Roberts, an obstinate, 
tenacious man, who had started in the rail- 
road business as a rodman with a construc- 
tion gang, and had a small opinion of 
financiers; he was a Welshman, to boot. 
Roberts spoke plainly on the subject of rail- 
roads built to compete with established 
lines. He called it blackmail, and said that 
the only way to put a stop to operations 
of this kind was to fight, fight, until the 
builders were crushed. He intended to 
follow this policy, and declared that no one 
could induce him to drop it. This last was 
spoken for the benefit of Mr. Morgan, who 
had begun negotiations for some sort of com- 
promise. Andrew Carnegie, who had be- 
come heavily interested in the South Penn- 
sylvania, went to Roberts and suggested 
gently that the new road could be better 



EAILROAD CHAOS AND RUIN 109 

managed as part of the Pennsylvania sys- 
tem. Roberts replied that Mr. Vanderbilt 
and other rich men had put their money 
into it, and he saw no reason for taking it 
off their hands. Vanderbilt, as a matter of 
fact, did not want to sell, although he 
wanted mightily to get out of the net in 
which he found himself entangled. 

Meanwhile Mr. Morgan had been to see 
Frank Thomson, the vice-president of the 
Pennsylvania. He said to Thomson that 
he had become convinced that something 
should be done to establish harmony among 
the trunk lines. Thomson said that there 
were two sores to be healed: one was the 
West Shore and the other was the South 
Pennsylvania. 

*'I have talked that matter over with the 
New York Central people,'' Mr. Morgan re- 
plied, ^'and I understand that they will take 
the West Shore if the Pennsylvania will 
take the South Pennsylvania." 

''As matters stand," Thomson said, ''I 
don't see how it can be done. Mr. Vander- 
bilt has seen fit to go into Pennsylvania. 
No one wanted him to come here and build 
a railroad, and why should the Pennsyl- 



110 J. PIERPONT MORGAN 

vania, the road he would injure most, give 
him back the money he has expended on the 
South Pennsylvania?" 

Having received a taste of the opposition 
he was about to encounter, but not in the 
least affected by it, Mr. Morgan went back 
to New York and saw Chauncey M. Depew. 
They went over the details of the West 
Shore purchase, and made some definite ar- 
rangements; before very long Mr. Morgan 
returned to Philadelphia. 

At an inquiry which was afterwards held 
to investigate the South Pennsylvania deal, 
Mr. Morgan told what he then did : 

''It being believed," he said, "that suffi- 
cient influence could be brought to bear on 
Mr. Vanderbilt to induce him to supply a 
majority or more of the South Pennsjd- 
vania subscriptions, I made a trip to Phila- 
delphia. I suggested to Roberts and Thom- 
son that if the Pennsylvania Railroad was 
prepared to take the South Pennsylvania 
for bonds or any other security that bore 
three per cent., assuming that the sum 
would amomit to five and a half millions or 
over, I thought the thing could be carried 
through. Roberts doubted the policy or the 



RAILROAD CHAOS AND RUIN 111 

ability of the Pennsylvania Railroad Com- 
pany, as such, to buy off or in any way in- 
terfere with what might be considered rival 
roads. 

"Later, I arranged a meeting on my 
yacht between Mr. Roberts, Mr. Depew, 
Mr. Thomson, and myself. At that meet- 
ing there w^as practically an agreement 
reached on the plan as ultimately carried 
out. The amount was to be ascertained, 
the accounts were to be examined with a 
view to arriving at the cost of construction 
of the South Pennsylvania, and this cost 
was to be covered by the security of the 
Pennsylvania Railroad or som»; thing which 
should pass through that ( Liannel. The 
only thing stipulated was that the security 
to be given the subscribers was to bear the 
absolute guarantee of the Pennsylvania 
Company. 

''Having obtained that much from Rob- 
erts, we went to work again with Mr. Van- 
derbilt and his associates. The details of 
what was required to be done were sent me 
by Mr. Roberts. It was then necessary to 
draw up the papers. Mr. Roberts said 
it was necessary for someone to be the pur- 



112 J. PIEKPONT MORGAN 

chaser other than the Pennsylvania Rail- 
road. As a firm we (Drexel, Morgan & 
Co.) could not do this, but as an individual, 
feeling the importance of what was at stake, 
I was prepared to do what I could, and to 
give the use of my name and signature to act 
as purchaser of one for the other. The pa- 
pers were made out in this way, consisting 
of a form of contract for the subscriber to 
sign, the guarantee that the subscribers re- 
quired from me to protect ^liem from any 
further calls from the purchaser, and an 
agreement to deliver the property." 

In the Morgan account, short work is 
made of the Pennsylvania opposition, once 
so strong. An agreement was reached, says 
the new dictator of railroad destinies. But 
how? We shall come to that presently. 
The curiosity of the examiner was aroused 
by the circumstances of the meeting on 
board the Corsair. 

Q. Mr. Morgan, was there anything said about get- 
ting the business through speedily? 

A, I do not remember anything in particular nor 
in general. When I have business on hand I think 
it is better to have it done quickly. That is my 
experience. 

Q. Why did you go on the yacht 1 



EAILEOAD CHAOS AND RUIN 113 

A. Because it was a convenient place. 
Q. Then it was not for the purpose of having no- 
body know what business you were engaged in ? 

As a matter of fact, Mr. Roberts went 
aboard the Morgan yacht protesting that 
he knew his own mind. He had said he 
would not buy a hole in the ground ; a hole 
in the ground — that's what the so-called 
South Pennsylvania was and always would 
be — and a rat hole for money. He had 
always said he was quite willing for Mr. 
Vanderbilt to fry in his own fat, and 
the other rich men along with him. And 
he saw no reason to change his opinion. 

The Corsair sailed to Sandy Hook and 
turned and cut her way back again through 
New York Harbor. She entered the Hud- 
son River and kept on up as far as 
West Point, then turned again and started 
back to Sandy Hook. Mr. Morgan said 
very little; he smoked black cigars. Mr. 
Depew related the experience that the Cen- 
tral had had with the West Shore. He 
showed how it was possible for a great rail- 
road, no matter how prosperous, to be cut 
into and weakened in all its resources by a 
rival line of no standing whatever. He 



114 J. PIERPONT MORGAN 

suggested that in the end the Pennsylvania 
would find it much more costly to stand out 
than to accept Mr. Morgan's proposal. 

"That's right! That's right!" ex- 
claimed Mr. Morgan. "Can't you see it? 
In the end you would have to come to it. In 
the end you would have to buy out or con- 
trol this other road only to make your con- 
nections. You must come into this thing 
now." 

Hours slipped away; luncheon had been 
served ; the sun no longer rode high ; every- 
body, except Mr. Morgan, had smoked 
more of the black cigars than were good 
for them. Still the Corsair churned along. 

"But why," objected Mr. Roberts, 
"should we make ourselves responsible 
for others' mistakes — why pull them out 
of the hole they have got themselves in- 
to?" 

Mr. Depew drew him aside. It was 
clear that this man was standing out, be- 
cause he thought someone should be pun- 
ished for getting the railroads into all this 
mess. He thought the big backers should 
be taught a lesson. Depew put it to him 
that these men, those big, rich individuals, 



EAILROAD CHAOS AND RUIN 115 

with their lack of sound railroad knowledge 
and their willingness to throw their cash 
into the wrong places, had already received 
severe punishment. It was true; in the 
scaling down of debts, in the sacrifice of in- 
terest, the backers were bound to suffer. 
''Oh, no," said Mr. Morgan, striding over, 
''they'll not get out whole." 

At seven o 'clock in the evening President 
Roberts interrupted the silence that had fal- 
len upon all. "Well," he said, "I agree. 
AU right, I agree." 

The thing was done. The personal feel- 
ings of two men had been sacrificed, 
Vanderbilt's dreams for the South Penn- 
sylvania, Roberts's animosity. The South 
Pennsylvania plan went through as already 
narrated, and in the case of the West Shore, 
President Depew, Mr. Morgan, and Judge 
Ashbel Green, who had been the receiver, 
bid in the road at a foreclosure sale for 
twenty-two millions of dollars. The Cen- 
tral agreed to guarantee the principal and 
interest upon the bonds of the West Shore, 
and the arrangements were aU but perfected 
when one James J. Belden, a lawyer of 
Syracuse, after obtaining ten shares of West 



116 J. PIERPONT MORGAN 

Shore stock, asked the courts for an injunc- 
tion to prevent the road from becoming the 
property of the New York Central. 

This was a blow, — especially to Depew and 
Green, who had made themselves responsible 
for the success of the reorganisation plan. 
In case of a serious hitch they might have 
to pay twenty-two millions themselves. The 
situation dragged itself out and the bond- 
holders began to become interested. It was 
said that there was a syndicate backing 
Belden. What was his price for his ten 
shares of stock'? One million dollars! 
That was his asking price. Depew got a 
better bargain than this, but the price he 
had to pay was the highest ever paid for any 
ten shares of stock. 

When all was finally settled, rate-cutting 
ended instantly ; and the whole railroad sit- 
uation improved rapidly; James D. Layng 
was called from the Chicago & Northwest- 
ern to operate the West Shore in harmony 
with the Central. The New York Central 
now owns all the common stock of the West 
Shore, and has infused credit into its bonds. 
As matters turned out the terminals owned 
by the West Shore are to-day worth more 



RAILROAD CHAOS AND RUIN 117 

than the Central paid for the entire prop- 
erty. 

People living along the Central's lines had 
been enjoying cheap rates at the expense of 
the railroad, and the truth is, it was time. 
During the great railroad wars of 77, '78, 
and '79, when through rates were reduced 
to far below the cost of transportation, the 
Central continued to pay regularly eight 
per cent, dividend on its enormous capitali- 
sation. It was enabled to do this out of the 
splendid local traffic; the local shippers 
made up the losses incurred by the cheap 
through business. Therefore, the people 
had looked ujoon the West Shore, which pro- 
posed to open the doors to competition, as a 
benefactor; its failure caused deep disap- 
pointment. The question which concerned 
them was not the loss to the bondholders of 
the West Shore nor the benefit which would 
now come to the stockholders of the Central ; 
the point that came home to them was the 
broader matter of the effect of the consol- 
idation upon the country through which the 
two roads ran. 

Local shippers found themselves once 
more at the mercy of a monopoly, and could 



118 J. PIERPONT MORGAN 

only hope that the railroad would not pur- 
sue a short-sighted policy in the treatment of 
its local patrons. 

*'We must rely on public opinion to get 
a fair deal," it was said, "but it cannot be 
denied that this absorption brings us face to 
face with the great railroad problem." 
This was a totally different side of the rail- 
road question from the one that Mr. Morgan 
had attacked. 

It need not be remarked that it was just 
as necessary of solution as any of the in- 
tricate financial questions he undertook to 
settle. Mr. Morgan felt, however, that be- 
fore the rate question could become the issue 
of first importance, it was necessary to place 
the railroads themselves in a position to 
continue to do business. He showed that he 
was the one man who could accomplish this, 
and for the next ten years of his life he was 
allowed to do very little else. 

He began to figure in directorates. At 
the board meetings Mr. Morgan usually 
chose the part of attentive listener, not often 
volunteering suggestions, and responding in 
a brief, laconic manner to any request for 
information. 




MR. MORGAN'S HOUSE ON MADISON AVENUE 
NEW YORK CITY 




THE LIBRARY IN THIRTY-SIXTH STREET, ADJOINING 
THE RESIDENCE AT THE CORNER OF MADISON AVE^" ' 



RAILROAD CHAOS AND RUIN 119 

One who served upon several boards with 
Mr. Morgan recalls the following impres- 
sions, reprinted here in his own words: 

"I early became impressed with the fact 
that, with a single exception, I never saw 
him irritated or disposed to yield in the 
slightest to a sense of annoyance, imless 
something was suggested that seemed to be 
more or less in the line of trickery. He al- 
ways stood for straight dealing, and that, 
too, notwithstanding the fact that he was a 
master financial diplomatist, possessing 
great intellectual resources, and intuitive 
judgment, the like of w^hich I have never 
seen. 

'^The only time I ever saw Mr. Morgan 
show that he was annoyed was at one of 
the board meetings of those days. A sub- 
ordinate officer of a railway corporation 
brought in a document or a report contain- 
ing the names of the directors, and, among 
others, the name of Mr. Morgan, who 
glanced in turn at the document ; and, after 
looking at it a moment, threw" it on the table. 
He pointed to his name and said, angrily, 
'That isn't the way to speU my name, I want 
it corrected. My name is spelt Pierpont, 



120 J. PIERPONT MORGAN 

not Pierrepont; and I should be pleased if 
that would be understood hereafter in this 
office. ' 

''If there appeared in print an article 
praising him for anything he had done, and 
his name was spelt Pierrepont, that lapse 
outweighed anything that was said. ' ' 

An extremely sensitive man to small 
things, to criticism, he was indifferent to at- 
tack, to notoriety, and his friends say that 
even at this early day, he regarded the grad- 
ual creeping of his name into the news- 
papers, either with absolute indifference or 
with a mild curiosity, as though he won- 
dered why anything that he did, and espe- 
cially his personality, should be of the 
slightest interest to the public. 



CHAPTER VII 

THE BEGINNING OF FEUDAL FINANCE 

AT fifty, a good proportion of the men 
of history have found their work, won 
fame, and been laid away. At fifty, the 
subject of these articles was unknown ex- 
cept in his own circle; the newspapers 
rarely mentioned his name, and then only 
in a bare sentence, as if it were the name of 
a railroad or a bank. An element of fas- 
cination may be found in the unstudied 
mediocrity of this future financial power; 
it makes us think of Stonewall Jackson, 
middle-aged and grown a bit pedantic, teach- 
ing arithmetic in the late fifties; or Grant 
serving under Halleck near the beginning of 
the war. J. P. Morgan served his clients, 
the investors, and so added to his fortune 
year by year. Also he took a share in the 
bankers' syndicates that sold bonds for the 
Government or the railroads. 
But, in the meanwhile, a great many 

121 



122 J. PIERPONT MORGAN 

things were going utterly wrong; things 
which vitally affected Mr. Morgan himself, 
and all his people — the investing public, 
here and in England. The great railroad 
systems were running down hill, financially ; 
they were ceasing to pay dividends, and in 
a large number of cases they were rapidly 
sliding into the position where the bond- 
holders would cease to receive interest on 
their holdings, and would be lucky if they 
did not lose part of their principal as well. 

Nor was there any sound reason for such 
a condition of things. To J. P. Morgan the 
cause was as plain as day ; in his opinion, it 
was fool management. 

The railroads of the country were at war, 
almost continually, one with another. It 
was slaughterous, savage warfare, costing 
as much in everything but lives as fighting 
with cannons and muskets. And Mr. Mor- 
gan's friends paid the cost — they always 
paid. And the wars became bitterer and 
more expensive every year. The situation 
was intolerable. Eastern people, through 
their bankers, had bought largely of railroad 
securities; wisdom could prompt no surer 
method of obtaining a return upon spare 



FEUDAL FINANCE 123 

capital. Quiet homes in the far-away coun- 
ties of England were supported, or sup- 
posed to be supported, by the returns from 
American railways. These English im- 
agined they were taking shares in the 
conquest and development of this extraordi- 
nary, new, rich land; it was their faith 
which touched Mr. Morgan most keenly, be- 
cause it affected the honour of the London 
house. If they could have seen with their 
own eyes how the railroads of the period 
were pouring their money into a sluiceway 
they would never have survived the shock. 

For example: 

Imagine the Gilt Edge Flyer of the C. & 
O. W. tearing at unbelievable speed east- 
ward, and the Silver Plate Limited of the 
renowned K. & J. line hastening westward 
like a cannon shot — upon the same track 
— the same pair of rails. 

The presidents of the respective rival 
lines sit back and receive their reports, 
brought to them by wire. In an hour, in 
half an hour, in a very few minutes, in a 
second or two — so the time passes — ^they 
will learn of a heaven-wrecking smash, 
head-on. 



124 J. PIERPONT MORGAN 

The moment arrives. The two trains 
completely demolish each other. There is 
an enormous bill of damages, a hole in the 
fertile prairie — and some advertising. To 
pay the bill some more securities must be 
sold. From the viewpoint of both railroads 
this striking affair was a perfectly reason- 
able occurrence. **The other fellow was 
on my track; I warned him off first," ex- 
cuses the president of the (imaginary) C. 
& O. W. Ditto the unhesitating chief of 
the progressive K. & J. 

This is an illustration, not an instance; 
it is the situation simplified. The actual 
instances consisted of innumerable ticket 
scalping deals — tickets disposed of by the 
thousand at half price to brokers like the 
celebrated Frank; or freight rates nailed 
for a Aveek to a dead tree in the woods in 
evasion of the provision requiring public 
posting of rates, and taken do\vn again when 
the stolen business has been run through. 
All the roads lost heavily by these chicaner- 
ies. Those who won most lost most, be- 
cause they won business at the price of 
carrying it for less than cost. And j^et, if 
they held back, refused to take a hand in the 



FEUDAL FINANCE 125 

greedy game, they ran empty trains — and 
lost more still ! 

There was no logic in this business. It 
was not business; it was a dog-fight. The 
conservative journals of the day, unable to 
find the word for it, coined a phrase — ^they 
called it Criminal Competition. 

The railway management was scarcely to 
blame. It faced a condition. Its other 
alternative was to go out of business. The 
blame came back to the speculators who 
overbuilt the mileage of the country, con- 
structed useless parallel lines, or flung out 
easily obtained dollars upon the uninviting 
landscape where no business was, or per- 
haps, ever would be. They made their own 
fortunes in construction and got safely 
away with them, leaving the railroad prob- 
lem for others. This narrative has already 
gone into the details of these enterprises. 
For the present it is enough to bear in mind 
that a country as good as a gold mine had 
been overworked for a crazy decade — and 
that the panic of 1893 was fast approach- 
ing, and preparing. 

For Mr. Morgan's English friends there 
was this exhibit in the year '89. Of 



126 J. PIEEPONT MORGAN 

American railway securities listed on the 
London Stock Exchange, to the amount of 
five hundred and six millions, onlv one com- 
pany was paying dividends on its common 
stock, and but two or three on preferred. 
The London Statist noted in clear type that 
"the consequences of rate wars on American 
railways are proving so disastrous to the 
holders of securities, and the prospects are 
so gloomy, that some heroic remedy must be 
resorted to, else the whole investment will 
be lost." 

Within thirteen years 423 American rail- 
road companies, with a total mileage of 
43,770 miles, representing more than two 
and a half billions of capital, had gone the 
way to dusty death — in bankruptcy. 

For the calendar year 1888 the gross 
earnings of ninety-five railroads amounted 
to $622,659,427, an increase of $20,403,147, 
or about three and a half per cent, over the 
total of 1887. But their net earnings for 
the year were $202,544,600, a decrease as 
compared with the net earnings of the pre- 
ceding year of $14,481,996, or about six per 
cent. 

They had done twenty million dollars 



FEUDAL FINANCE 127 

more business in '88 than in '87, but earned 
fourteen million dollars less money. 

As for the stockholders, their informa- 
tion was fragmentary; they scarcely knew 
anything about the affairs of the roads of 
which they were sole owners, and whose 
affairs they were supposed to run. Doubt- 
less they might have put together the j^ieces 
of information that were gingerly passed 
out to them — if they had tried; and might 
have made an intelligible whole. But they 
seldom tried. The larger the railroad sys- 
tem, the less active attention given to its 
affairs by those primarily interested in its 
well-being. And they were smoothed down 
by bookkeeping fictions. In a great many 
instances what passed for the corporate sur- 
plus of a railroad company resembled the 
celebrated forty-eight million dollar one of 
the Baltimore & Ohio, which proved a 
bookkeeping tale. It included all net earn- 
ings in excess of dividends, and by charging 
off depreciation and errors, was reduced, 
by a brief calculation, to a most modest 
basis. 

But in New England there were some 
stockholders insurgent. At the annual 



128 J. PIERPONT MORGAN 

meeting of the Fitcliburg road they passed 
a vote unanimously directing the manager 
to publish regular monthly statements of 
gross earnings, and regular quarterly state- 
ments of gross earnings, expenses, net earn- 
ings, and the proportion of fixed charges 
and rentals assignable to these quarters — a 
most practical and illuminating step. This 
was one of those roads which preserved the 
old-fashioned custom of having its officers 
meet the stockholders in person at its an- 
nual meeting. The Illinois Central and the 
Chicago, Burlington & Quincy manage- 
ments were publicly attacked by their stock- 
holders. 

Sometimes these sudden displays of in- 
terest in hitherto neglected business were 
useful, but not often. On the whole the 
enormous and distended railroad industry, 
with its mass of cumbersome conditions, ill- 
assorted, overt, and tricky details, continued 
to remain an unfathomable scandal and ob- 
ject of alarm. 

And, meanwhile, there was Mr. Morgan, 
the future King of Money — but, in those 
days, simply a banker, with ideas, with 
methods, Avhich he had put into practice in 



FEUDAL FINANCE 129 

his own business for three decades. We 
have arrived at the exact point in his life 
when the Morgan that we now know was 
setting out on his journey toward the spe- 
cial pinnacle he has attained; when he took 
his first step away from the beaten path of 
routine business, and imdertook, in his priv- 
ate capacity, public work. ^ The point when, 
in th*^ language of some, he set out to gobble 
up the wealth of the country, or, as others 
see it, when he started in to run our business 
for us in the way he thought it ought to be 
run; or, as still a third party sees it, when 
he decided to become a public benefactor 
and to render a kind of financial service for 
the rest of his days. 

In other words, the question of Mr. Mor- 
gan's motive, of his moral feeling, is to be 
answered by the events of his career, begin- 
ning now — with the year 1885 and continu- 
ing thereafter. 

Follomng the actual happenings in J. P. 
Morgan's life will lead us to but one con- 
viction, namely, that the first and the third 
views of the money king noted above are 
both somewhat romantically false, and that 
the second — which holds that his primary 



130 J. PIERPONT MORGAN 

interest in affairs, tiie moral axis upon which 
his career turns as a whole, is a natural pas- 
sion for sound, well-founded business, with- 
out logical flaws or sapping w^eaknesses — is 
very nearly the true view of him. 

It is as nearly true as any analysis of a 
human being can be which does not fill a 
volume and explain or account for every- 
thing. As we go on w^e shall have to dis- 
entangle situations made up of an intricate 
mixture of motives, in some of which the 
colour bears out either one or the other of 
two conceptions of Mr. Morgan we have 
called false. No matter for that ; shace it is 
the man himself we seek, and no caricature, 
we shall find these complications doubly in- 
teresting. 

In the year 1885 he suddenly felt it di'iven 
in by successive shocks that he must do 
something about the railroads. With Mr. 
Morgan it is always do nothing, or do every- 
thing; sit by, or take charge. We related 
in the last chapter what he did with the West 
Shore-New York Central, and the Pennsyl- 
vania Railroad tangles. He did not take 
sides ; he took command. Using the logic of 
sound business as a big stick, he compelled 



FEUDAL FINANCE 131 

the irreconcilables to submit to his plans, 
when no one thought such an outcome pos- 
sible. 

He had scarcely finished with his business 
when another, still more ragged, menacing 
situation, confronted him — the demoralisa- 
tion of the great Philadelphia & Reading 
Railroad. 

The Reading was one of the largest rail- 
road companies in existence. It had a 
capitalisation amountmg to hundreds of mil- 
lions, and an earning capacity of forty mil- 
lions a year. It was an immense and 
permanent machine for turning out dollars 
profit — but there was something very wrong 
with its economy, for it did not even pay its 
way. 

When a little business gets into difficul- 
ties, the process is painful, but not exciting 
to contemplate, except for those immedi- 
ately concerned. The final catastrophe 
falls on only one or two people, and it is 
usually true that a little more money would 
have saved it. But when a big business be- 
gins to fall into ruins, it is something appall- 
ing to watch — especially a railroad. A rail- 
road cannot shut up shop and pull up its 



132 J. PIERPONT MORGAN 

tracks. It can never be given up for dead 
— its disease must be cured, take how long 
it will, cost what it will. A bankrupt rail- 
road is fated to sprawl supine upon the 
breasts of its wretched security holders, and 
those whom it doesn't pauperise at once it 
frightens half to death with its monstrous 
and mounting expense bill. Its difficulties 
must be met, but how ? This is no affair of 
the grocer's shop, this Cyclopean ruin. 
With its thousand-fold complications it pre- 
sents a problem which mere shrewdness, 
good judgment, experience, cannot hope to 
solve. The records of the various bond- 
holders' committees prove this statement 
true. 

The condition of the Reading was this: 
Its annual fixed interest charges amomited 
to $6,300,000. Of the 1,586 miles of road, 
1,152 miles were held under lease, at an 
annual rental of $9,371,021. In short, 
Reading must earn $15,667,058 net to meet 
its charges. In addition to this there was 
at the close of the year 1885 a floating debt 
of $25,000,000, the interest upon which 
brought up the total income required to 
$17,000,000. 



FEUDAL FINANCE 133 

Against this crushing load the Reading 
showed an earning capacity during three 
years past as follows: 

Net 
earnings Charges Results 

1883 $ 8,339,934 $ 6,816,183 * $1,523,751 

1884 13,396,534 16,874,453 1 3,355,251 

1885 12,527,569 17,125,451 1 4,597,882 

*Surplus. fDeficit. 

And the year 1886 showed a deficit of 
nearly six millions. 

When Mr. Morgan undertook the task of 
replacing these millions of yearly loss with 
a yearly gain he met with unexpected diffi- 
culties. A railroad reorganisation resem- 
bles a pruning process and financiers may 
differ as much as orchardists as to the 
degree of severity required. The process 
mainly consists of lopping off interest 
charges by exchanging the present bonds 
for others of a new issue bearing a lower 
rate of interest. Another feature, almost 
equally inevitable, is a cash assessment upon 
the shareholders, of a certain sum for each 
share of stock. To put this through it is 
necessary to get the consent of the secur- 
ity holders themselves. As there are always 



134 J. PIERPONT MORGAN 

many classes of securities, and as all do not 
suffer alike, there is room for a vast and 
acrimonious difference of Ojpinion concern- 
ing any plan that is proposed. In the pres- 
ent instance it was announced early in the 
spring of 1886 that a combination of bank- 
ers had been formed to reorganise Reading, 
and that the firm of Drexel, Morgan & Co. 
was underwriting the plan, through a syn- 
dicate with a capital of fifteen millions. But 
it turned out that the security holders were 
unwilling to accept the sacrifices demanded 
of them, and the Morgan plan also met 
with the determined opposition of the jDresi- 
dent of the road, Franklin B. Gowen, who 
had the backing of a large following. After 
some weeks of fruitless labor Mr. Morgan 
drew back and left the field to Gowen, who 
got up a scheme of his own. Failing to ob- 
tain backing for his plan, Gowen had to 
step down, and Austin Corbin was made 
president, and in the fall of '87 Mr. Morgan 
put his own plan through. By cash assess- 
ments, which by this time the security 
holders were willing to yield, the big float- 
ing debt was wiped out. Interest charges 
were reduced several millions below the 



FEUDAL FINANCE 135 

amount of the net earnings, and in its next 
report the wrecked railroad showed a profit 
of nearly three millions. 

This reorganisation was regarded as a 
wonderful piece of work at the time ; it was 
said that Beading's affairs had been so re- 
adjusted that the road could never again, 
under any possible circumstances, drift into 
bankruptcy. But in making this remark, 
the prophet tripped and fell. The road had 
not been made fool proof by any means; 
within five years it was back again on Mr. 
Morgan's hands. 

When Austin Corbin became president 
he enlisted on his official staff a protege 
named McLeod, who was destined to 
achieve the nickname of the Napoleon of 
the railroad world, to occasion a Congres- 
sional investigation of his operations, and to 
irritate insufferably J. P. Morgan. Mc- 
Leod became president of the Reading after 
Corbin resigned and undertook to form a 
vast coal monopoly in connection with New 
England roads. He leased lines and formed 
alliances which required millions more capi- 
tal than he could command. The price of 
coal was raised to the consumer, which en- 



136 J. PIERPONT MORGAN 

raged the public. In extending Ms control 
into New England, McLeod fell foul of the 
New York and New Haven, in which Mr. 
Morgan was greatly interested; his attacks 
on the New Haven proved to be the last 
straw. Mr. Morgan, representing the en- 
tire banking community, undertook to disci- 
pline McLeod, who resented his interfer- 
ence, and would not accept his suggestions. 
''I would rather," said he, *'run a peanut- 
stand than be dictated to by J. P. Morgan." 
In the spring of 1893 he resigned, leaving a 
wrecked property behind him. Mr. Mor- 
gan had his work of reorganisation aU to 
do over again, and in a panic year. He was 
busy with another and even more difficult 
affair at the time, and did not give his atten- 
tion to Reading. The new management un- 
dertook to reorganise the road, but its plans 
met with a chilling reception from the se- 
curity holders. They could not see where 
they were coming out, and they refused to 
make any more sacrifices. 

At last the bondholders appealed directly 
to Mr. Morgan to do the job, and once more 
he reorganised Reading. In the eight years 
that had passed the road had acquired a 



FEUDAL FINANCE 137 

new floating debt, eighteen millions this 
time, which must be disposed of as before. 
When he had finished the work Mr. Morgan 
kept the control of the road in his own 
hands. He took no chances of permitting 
an enterprise which required careful treat- 
ment to fall into the hands of any wild- 
cat management, and the security holders 
were at one with him on that. Unable or 
unwilling to look after their own interests, 
they were only too glad to have Mr. Morgan 
do it for them. And after this experience 
Mr. Morgan invariably retained control of 
the railroads he reorganised, either through 
the spiral device of a voting trust, or a con- 
trolling ownership of stock. In this way, 
and at this time, the feudal position which 
he now occupies, the one-man power in 
American finance which he is, had its be- 
ginning. 

During these years the general railroad 
situation was going from bad to worse. In 
the West the newer and younger roads were 
rapidly approaching the abyss of bank- 
ruptcy, and in the year 1889 Mr. Morgan 
made a determined and novel effort to 
impress them with the need of complete re- 



138 J. PIERPONT MORGAN 

form. The Western railway presidents 
had their own organisation, which had 
attended to the pooling of business be- 
fore i^ooling was forbidden by the new In- 
terstate Commerce law ; now the association 
was supposed to work in harmony on the 
basis of a ^'gentlemen's agreement" — 
which no gentleman kept. In the last week 
of December, '88, Mr. Morgan invited the 
Western presidents to meet the bankers at 
his house on Madison Avenue. The ob- 
ject of the meeting was to bring about con- 
certed action and stop the suicidal rate cut- 
ting. This first meeting was adjourned 
until January 8. And between the two 
meetings, more rate cutting took place, so 
that when the presidents met they were in no 
good humour with themselves or with one 
another. 

There were Charles Francis Adams, of 
the Union Pacific; Marvin Hughitt, of the 
Chicago & Northwestern; R. R. Cable, of 
the Rock Island; Frank S. Bond, of the 
Chicago, Milwaukee & St. Paul ; Jay Gould, 
and his son, George, of the Missouri Pa- 
cific; A. B. Stickney, of the Chicago, 
St. Paul & Kansas City, and half a 



FEUDAL FINANCE 139 

dozen others from the railroads. Repre- 
senting the bankers, besides Mr. Morgan, 
were J. Hood Wright, of the Morgan firm ; 
John Crosby Brown, of Brown Brothers; 
George P. Magoun, of Kidder, Peabody & 
Co., and the Barings, and also two or three 
others. 

The men who ran railroads and the men 
who furnished the money to construct them 
were face to face for the first time at a for- 
mal meeting. It was purely a business oc- 
casion. To put it simply, the represent- 
atives of capital intended to show the rail- 
road men the whip. They intended to con- 
vey to them a very definite impression that 
further misbehaviour would be punished by 
cutting off the supplies. Mr. Morgan him- 
self did not mince matters in what he said ; 
he thought it a time for plain speech. 

*'The purpose of this meeting," he said, 
*'is to cause the members of this associa- 
tion to no longer take the law into their 
own hands when they suspect they have 
been wronged, as has been too much the 
practice heretofore. 

"This is not elsewhere customary in 
civilised communities, and no good reason 



140 J. PIERPONT MORGAN 

exists why such a practice should continue 
among railroads." 

President Roberts, of the Pennsylvania, 
retorted: '^ Speaking in behalf of the rail- 
road people of this country, I object to this 
very strong language, which indicates that 
we, the railroad people, are a set of anarch- 
ists, and this is an attempt to substitute law 
and arbitration for anarchy and might." 

There was a silence, and then Stickney 
said he opposed secret meetings like the 
present one. "The public," he added, "are 
sure to think we are conspiring to do some- 
thing that we ought not to do." 

No one agreed with Stickney upon this 
point. Roberts made a sjDeech in which he 
dwelt upon the fact that the building of use- 
less parallel lines was responsible for all the 
troubles of the railroads. He pointed to 
the bankers as the persons who could put a 
stop to this if they would. And he repeated 
his complaint concerning Mr. Morgan's 
strong language, saying: "I cannot help but 
feel that it is a little harsh language for us 
to hold here, but I can stand it, I suppose, 
if the others can." 

Ignoring this last remark, Mr. Morgan 



FEUDAL FINANCE 141 

came straight to the point: "In regard to 
the remarks made by Mr. Roberts in regard 
to the bankers and the construction of par- 
allel lines, I am authorised to say, I think, 
in behalf of the houses represented here, 
that if an organisation can be formed which 
shall accomplish the purposes of this meet- 
ing, and with an Executive Committee able 
to enforce its provisions, upon which the 
bankers shall be represented, they are pre- 
pared to say that they will not negotiate and 
will do everything in their power to prevent 
the negotiation of any securities for the con- 
struction of parallel lines, or the exten- 
sion of lines not unanimously approved by 
the Executive Committee. I wish that dis- 
tinctly understood." 

Next, Mr. Adams expressed his mind in 
a little speech, saying, "The difficulty in 
railway management does not lie in an act 
of legislature, State or National, but does 
lie in the covetousness, want of good faith, 
and low moral tone of railway managers, 
in the complete absence of any high stand- 
ard of commercial honour. Now the ques- 
tion we are to decide here to-day is whether 
any gentleman representing a railroad com- 



142 J. PIERPONT MORGAN 

pany is prepared to stand up and say be- 
fore the public and before us that he is 
opposed to obeying the law, and, further, 
that in matters of controversy he prefers to 
take the law into his own hands rather than 
submit to arbitration. That is the whole 
thing in a nutshell.'^ 

Mr. Hughitt did not agree that it could 
be put in a nutshell thus. He did not see 
how he, as president of his road, could agree 
to submit the interests of his people to arbi- 
tration. 

There was much more discussion; at 
times the meeting resembled a meeting of 
the chiefs of the fighting clans of Scotland ; 
each man was passionately certain, convinced 
in his own mind, that his neighbour, not he, 
was at fault. Some fair sounding, though 
nearly futile, resolutions were formally 
passed. It was agreed to discourage dealing 
with scalpers, and a board to hear com- 
plaints of rate-cutting was appointed. This 
board was given the power to fine roads 
which failed to keep the schedule, and each 
road had to put up a thousand dollars, out 
of which fines would be paid. This far-see- 
ing provision indicated clearly enough to 



FEUDAL FINANCE 143 

the public the fundamental futility of the 
attempted arrangement, since it showed how 
little the roads trusted one another, and it 
was not thought that any road would be held 
back very long by mere fines. 

However, the meeting shows what Mr. 
Morgan wanted to bring about above all 
things else — he wanted peace and square 
dealing between the heads of the railroads. 
He wanted peace and square dealing and 
observance of law and custom among them, 
because the opposites of these things spelled 
ruin for the roads. But at that time he had 
little power to enforce his ideas; his arm 
could not reach out there beyond the Miss- 
issippi. Even in New York, the Western 
railroad men were not greatly impressed 
with the ideas of the bankers; and once 
back in their own country they continued to 
do as they pleased. Does not this incident, 
in connection with others, indicate very 
plainly what the future aim of a man of 
Mr. Morgan's type was bound to be? If 
he could not influence men by tallying to 
them, he was bound to seek to control them 
by force. Everything taught him the need 
of getting control himself in order to ac- 



144 J, PIERPONT MORGAN 

comx^lisli his ends. We have seen what 
these ends were. 

The law which stopped pooling hastened 
the growth of the new financial feudalism, of 
which Mr. Morgan was the chief exponent. 
It was an inevitable thing. It was easy to 
say that if the railroads would all stop fight- 
ing they would all be the richer. It is easy 
to say that if the nations of the world would 
agree to stop fighting they woidd all be the 
richer. But, as a matter of fact, in the then 
situation of the railroad companies all 
would not have been richer if they had 
signed, and patiently adhered to, a peace 
agreement. Under fair conditions and with 
equal rates the business would have drifted, 
inevitably, into the hands of the bigger and 
better railroads; the weaker and poorer 
would have been forced to the wall. Under 
the illegal pooling agreements they had re- 
ceived an allotted share of the traffic income, 
and it kept them alive. Now being without 
any such protection they were under dog and 
had the choice to fight, steal, or starve. 

The railroad business was raw and new 
and little understood then; there is plenty 
of evidence that it is not thoroughly under- 



FEUDAL FINANCE 145 

stood even now. At the period with which 
we are dealing, Mr. Morgan looked its diffi- 
culties in the face and successfully sur- 
mounted them after his own fashion. And 
there began to take shape in the public mind 
a certain conception of him, as a man of 
stone, ruthless but magnanimous, gifted 
with a terrible energy, a terrible force 
of character; as a man who could plan cer- 
tainties, and as a man whose honesty in his 
relations to his clients was proven and abso- 
lute. At the age of fifty, Mr. Morgan was 
becoming a national figure; his actions be- 
came of national importance, for by their 
very size and scope they included questions 
political as well as financial, and provoked 
controversies and movements which still oc- 
cupy us to-day. 



CHAPTER VIII 

THE TREASURY CRISIS OF 1895 

MR. MORGAN'S contract to furnish 
the U. S. Government with gold in 
the year 1895 made his name known 
throughout the country. Up to that time 
he was known only to a comparatively small 
circle of powerful men, to investors by repu- 
tation, and the newspapers had not discov- 
ered him. 

In the winter of 1894-95 the United States 
Treasury, being swept by the tail of the 
calamitous panic of '93, fell into extreme 
difficulties. An extraordinary and unman- 
ageable set of circumstances, in which poli- 
tics and business were tightly intertwined, 
resulted in the steady withdrawal of gold 
from the Treasury for more than a year, un- 
til, unquestionably, we faced a suspension 
of specie payments. In other words, the 
work of Resumption — the hard won restora- 
tion of credit plunged deep at the time of 

146 



TREASURY CRISIS OP 1895 147 

the Civil War — was about to be miserably; 
undone. 

A visible peril this was not, save to com- 
paratively few. Mr. Morgan, August Bel- 
mont and a few other bankers on the one 
hand saw it coming; and President Cleve- 
land and the Treasury officials on the other 
engaged in a continuous struggle, both to 
keep the Treasury from running completely 
out of gold and to prevent the public from 
finding out the actual state of affairs. 
These insiders were convinced that if the 
situation became generally known the black- 
est kind of a panic would follow. 

It will be recalled that Mr. Morgan per- 
sonally managed and accomplished the res- 
cue of the Government from its dangerous 
plight and that President Cleveland con- 
tracted with him in secret to do this deed, 
and that both men were afterward de- 
nounced by the radical press, the one as a 
traitor to his office of trust, and the other as 
the unconscionable driver of a hard bargain. 
Why these harsh words? Because, to put 
the matter of this criticism at its best and 
sincerest (at its worst it was envy and mal- 
ice), the people felt that in a self-governing 



148 J. PIERPONT MORGAN 

democracy another way should have been 
found. 

The people were right, but wholly 
unreasonable. A well-governed country 
should not have permitted its national 
treasury to drift so near the rocks. What- 
ever was done was done in an emergency, 
as will soon appear. The emergency was 
dire and it was a dramatic one, although 
unclear to the casual eye, because of the con- 
fused and technical conditions creating it. 
And throughout, Mr. Morgan's personal 
characteristics and position, his peculiar 
power, appear in rugged relief. It was a 
sudden revelation of his personal force; as 
it was, in another way, a revelation of the 
strong character of Grover Cleveland. 

Let us come as near to the truth of these 
matters as we can. In order to represent 
clearly the nature of the bargain President 
Cleveland made with him, and, for Mr. Mor- 
gan 's part, the nature of the undertaking 
he proposed, it will be necessary to look 
somewhat deeply, and with a little patience, 
into the necessities and perplexities of the 
case. 

There were in 1895, as now, no less than 



TREASURY CRISIS OF 1895 149 

eight kinds of money in use throughout the 
country: gold certificates, silver certificates, 
United States notes, Treasury notes, Nat- 
ional Bank notes, gold coin, silver coin, and 
the little token coins of nickel and bronze. 
All looked to gold for their value, except, of 
course, the gold coin itself; but all did not 
obtain their value on the same basis, or by 
the same route. A gold certificate, for in- 
stance, represented an equal amount of gold 
that v^as held in the Government vault, the 
paper being used simply for greater con- 
venience. But a United States note, which 
is the typical form of Government paper 
money, was based, not upon actual gold, but 
upon the Government's implied promise to 
redeem it in coin if presented at the Treas- 
ury. When the first issue of these United 
States notes or greenbacks was made in 
1862, there was no attempt to treat them as 
redeemable in this fashion. Their value fell 
greatly in gold during the Civil War, but 
began to rise after the war ended, as soon as 
steps were taken to accumulate a fund of 
gold for their redemption. On January 1, 
1879, specie pajnuent was resmned, and these 
slips of Government paper became, for the 



150 J. PIERPONT MORGAN 

first time in their existence, as good as 
gold. 

Technically they were payable in ''coin," 
which meant either gold or silver. At that 
time no one foresaw that silver was destined 
to fall off steadily in value during the next 
decade — that it was going to take a greater 
and greater amount of silver to be worth a 
given quantity of gold. At that time there 
was no suspended menace in the unspecific 
word ''coin." Therefore, uncomplicated by 
the coming silver question, the dreaded or- 
deal of redemption was passed with ease. 
Against about three hundred and fifty mil- 
lions of its greenback notes the Govern- 
ment collected a gold reserve of one hun- 
dred and fifty millions, of which half the 
amount was sufficient to meet all demands. 

It now became a matter of administration 
policy to maintain against these notes a 
gold reserve of a hundred millions. It was 
never expected that the notes would be pre- 
sented at the Treasury for any purpose ex- 
cept to obtain gold for the use of the banks, 
or for shipment abroad. The hundred-mil- 
lion-dollar fund looked doubly, trebly suf- 
ficient for such needs. 



TREASURY CRISIS OF 1895 151 

But there had been a curious little pro- 
vision in the legislation of 1878 relating to 
the currency, which proved to be the tiny 
cause of a great effect in the year 1895. 
Congress, fearing that the retirement of 
notes by redemption in gold might leave 
too little money in the country, shoved in 
among other provisions the direction that 
the Secretary of the Treasury should pay 
out and reissue all of these notes that were 
received. This meant that the same note 
could be used to obtain its face value in 
gold at the Treasury an unlimited number 
of times; it could be used like a ladle to 
empty the Treasury of its gold. It was an 
unconscious joker in the law, perhaps im- 
possible of detection — ^then. 

The next ten years were not lean years. 
On the contrary, they were years of glow- 
ing prosperity, as everyone knows ; the quiet 
but triumphant resumption of specie pay- 
ment was like the completion of a dam, 
which made possible a new and steady flow 
of capital, energy, ideas, and faith in the 
material future of the country. Especially 
from abroad the stream poured in. It 
should be remembered that European in- 



152 J. PIEEPONT MORGAN 

vestors would not touch our bonds during 
the Civil War; they did not think the Re- 
public could be depended upon. Now, 
however, the business elation over here at- 
tracted their funds in great quantity, in too 
great quantities, as it proved. 

For the effect was to speed up Amer- 
ican business beyond what was natural and 
necessary. Where one factory or one rail- 
road in a section had done well, two or 
three found it possible to live only by prey- 
ing on each other. And, all the while, the 
liquid money arrived and sought its use in 
building more factories, more railroads. 
The bursting point was reached. Then, 
suddenly the backward swing of the pendu- 
lum of business turned the hot eagerness 
of the investing public into stony dread. 
All but the wisest saw black, and by their 
blind, frightened actions created the very 
conditions that in imagination they foresaw 
— which is the way a panic is made. This 
was the terrible panic of 1893. 

Meanwhile Congress had discovered the 
silver question. Under the Bland-Allison 
act a limited amount of silver bullion was 



TREASURY CRISIS OF 1895 153 

coined into silver dollars. In 1890 Con- 
gress sought to make tlie coinage free and 
unlimited, and the agitation finally resulted 
in the Sherman Compromise bill, directing 
the Secretary of the Treasury to buy four 
and a half million ounces of silver a month 
and to issue Treasury notes, which the Sec- 
retary was to redeem in gold or silver at 
his discretion. The working of this law 
proved disastrous ; silver became too plenti- 
ful, and hence undesirable, and the money 
sharps began to find a profit in exchanging 
the poorer metal for the better one, and 
sending the gold abroad. Within three 
years, before the law was repealed the 
Treasury lost nearly one hundred and fifty 
millions of gold. The Sherman law was re- 
pealed in June, 1893, but not soon enough 
to prevent invested capital from taking 
fright. The capitalists feared they might 
be forced to take back in silver what they 
had put in in gold. The sentiment in Con- 
gress favoring the violent assumption that 
one metal was worth, relatively, as much as 
the other, and that our debts could be paid 
in either, gave solid ground for this scare. 



154 J. PIERPONT MORGAN 

Behind this sentiment was working the 
powerful struggle of the silver producing 
States to boost their interest. 

Out West everyone was reading '^Coin's 
School of Finance," by Harvey, the book 
which taught in schoolmaster fashion the 
iniquity of the gold dollar, or they were 
studying woodcut cartoons in which the 
farmers of the comitry were represented 
by a cow and Wall Street as the assiduous 
milkman, pinching the last drop from the 
faithful beast. You saw people reading the 
book on trains, everywhere, and heard them 
cursing the Gold Bugs with heartfelt ear- 
nestness. The wild dogmas of the silverites 
and the threatening slant of business condi- 
tions made a deadly combination, a double 
distilled panic. As if our troubles at home 
were not enough, the investors of England 
and Euro23e asked for their money back; 
they asked for it right away — quick ! They 
wanted gold while there was gold in Amer- 
ica; and to gain it they persistently sold 
back to us the shares which, a short time 
before, they had been eager to buy. 

These sales built up a mighty balance 
against us on the books of the bankers 



TREASURY CRISIS OF 1895 155 

abroad. The price in New York of ex- 
change upon London went higher and 
higher. The effect of this increasing rate 
upon the Treasury was technical, but just 
as direct and vivid as a slash with a knife 
on your arm. Foreign exchange is virtually 
a check or draft sold at home upon a banker 
in another country. It takes the place of 
gold coin, which is the only universal 
money. The fact that the banking business 
acts as a clearing house for all foreign obli- 
gations, makes it possible to treat the com- 
bined accounts of one country with another 
as one big account. Thus there is always 
a balance for or against the United States 
with foreign nations. When the balance is 
against us heavily — when, in other words, 
there is nothing to draw against — , exchange 
rises higher and higher until gold itself 
must be sent. The one place to obtain it is, 
and, of course, then was, from the Treasury. 
Without hurry or precipitation, but by 
slow, sure steps of gradual decrease, the 
Government's gold disappeared. Some was 
sent out of the country, some was hoarded 
in the country by frightened banks or de- 
termined speculators. Twice Congress bor- 



156 J. PIERPONT MORGAN 

rowed fifty millions to replenish the reserve, 
but this only seemed to draw attention to 
the weak spot. Mere borrowing did no 
good. Buyers of Government bonds simply 
borrowed the gold temporarily to pay for 
the bonds, then exchanged the bonds for 
Government notes ; then, taking these notes 
to the Treasury, exchanged them for gold. 
Toward the middle of January, 1895, the 
gold reserve began to melt away much more 
rapidly. The panic spread to the New 
York banks and their country customers, 
and soon it was clear that most of the finan- 
cial forces of the coimtry had joined in a 
rash, unprecedented run upon the United 
State Treasurj^, w^hich was becoming as 
empty as a hollow log. 

Between December 1, '94, and February 
13, '95, about eighty millions were drawn 
out. The last week in January saw the 
reserve drawn dowTi close to fortj^ millions. 
At the rate which withdrawals had now 
reached, that of several millions a day, there 
was not a week's supply left. Indeed, there 
was not even this much, as a matter of fact, 
for all but about three millions of this total 
was not in coined gold but in gold bars, and 



TREASUEY CRISIS OF 1895 157 

the demand was then specifically for coin, 
and the bars were at a discomit. The bars 
could not be substituted, for the reason that 
this would betray the real weakness of the 
Treasury — ^which was kept a close secret. 
To publish the truth at this moment would 
have resulted in turning the panic into an 
immediate overwhelming disaster. From 
Chicago, San Francisco, New Orleans, the 
Treasury gathered up its last available sup- 
plies. But both the time and the means 
were lacking to block the inevitable climax. 
A more tormenting situation has seldom 
been prepared for an honest and responsible 
executive. It could not be laid bare to the 
public, yet that was the very step the Presi- 
dent was most anxious to take. Cleveland 
had no impression but one, and that was 
what arose from the nature of the great of- 
fice he held, the impression that relief should 
come directly from Congress and the people. 
He was not a financier. The abstruse and 
technical factors which had all the while 
combined to undermine the position of the 
Treasury — the high price of exchange, the 
mystifying disappearance of gold, the slow 
and cumulative weakening of the national 



158 J. PIERPONT MORGAN 

credit, the removal of the normal props of 
the currency — these were matters as puz- 
zling to his mind as to the majority of citi- 
zens who are not professional bankers. But 
he felt that Congress could and should vote 
the bonds which would provide some relief, 
if only a temporary relief. On the twenty- 
eighth of January Congress received an 
urgent special message from the President, 
in which, among other things, he said: 

The real trouble which confronts us is the lack of 
confidence, widespread and constantly increasing, in 
the continuing ability of the Government to pay its 
obligations in gold. 

The only way left open to the Government for pro- 
curing gold is by the issue and sale of its bonds. The 
only bonds that can be so issued were authorized 
nearly twenty-five years ago . . . they are made 
payable in coin instead of specifically in gold. . . . 
It is by no means certain that bonds of this descrip- 
tion can much longer be disposed of at a price cred- 
itable to the financial character of our Government. 

The most dangerous and irritating feature of the 
situation ... is found in the means by which 
the Treasury is despoiled of the gold thus obtained 
without cancelling a single Government obligation, 
and solely for the benefit of those wiio find profit in 
shipping it abroad or whose fears induce them to 
hoard it at home. . . . The same notes may do 
duty many times in drawing gold from the Treasury ; 
nor can the process be arrested as long as private 



TREASURY CRISIS OF 1895 159 

parties ... see an advantage in repeating the 
operation. 

Whatever ideas may be insisted upon as to silver 
or bimetalism, a proper solution of the question now 
pressing upon us only requires a recognition of gold 
as well as silver, and a concession of its importance, 
rightfully or wrongfully acquired, as a basis of na- 
tional credit, a necessity in the honourable discharge 
of our obligations payable in gold, and a badge of 
solvency. 

From Congress, in response to this well- 
considered and expressive demand, came 
nothing but the tom-tom ^lash of the polit- 
ical antagonisms of the hour — and set 
resistance. Congress never more clearly 
represented a boy's idea of a town meeting 
f^n Sit that moment. Words, without ac- 
tion, smoke, without fire. The silver agita- 
tion set off on a fresh flight, the silver men 
dogmatically toiling to prove the gold bugs 
usurers, while there was yet time, the gold 
men directing their arguments point-blank 
at the bend sinister in their opponents' doc- 
trine; they fought among themselves, not 
even regarding party, forever twisting and 
untwisting the same rope. 

''The President has declared war on 
silver," said Senator Vest dramatically. 



160 J. PIERPONT MORGAN 

*'He would make us accessories to this ef- 
fort to fix the gold standard upon us. " The 
Senator asked if any man believed the "sup- 
posed emergency" could not readily be met 
by Treasury payments in silver. "So far 
as I am concerned," said Vest, raising his 
right hand high in emphasis, "I will never 
vote to issue bonds to secure gold to place 
us on a single gold standard!" 

The answer of the National Legislature to 
the President's honest and direct appeal 
was : ' ' Gold is a badge of o]Dpression. ' ' 

The feeling spread rapidly in England 
and Europe that our case was hopeless. 

Thus the misfortunes of the Treasury 
settled down heavily and finally upon the 
head of the President ; upon his head alone. 

Meantime, however, there had been a 
succession of moves and countermoves be- 
tween the Treasury officials at Washington 
and certain bankers in New York. Mr. 
Cleveland had nothing to do with all this; 
he depended upon Congress. Theoretically, 
the officers of the Treasury depended upon 
Congress, too. That is to say the red tape 
in which they were tightly wound prevented 
them from openly beginning negotiations 



TREASURY CRISIS OF 1895 161 

with a private source. They were in the 
position of a man who should be forbidden 
to put out a fire in his own house before the 
city department arrived. He must see it 
slowly burning, and surely spreading, and 
yet not raise a hand. If we suppose in this 
case that the man knows to a practical cer- 
tainty that the official, red-painted appara- 
tus will not come in time to save his house 
from destruction, then we have a parallel. 
The officers of the Treasury knew that Con- 
gress could not be relied upon to save the 
Administration, and, using intense secrecy, 
they began to prepare to save it themselves. 
It was a visit from August Behnont which 
set the wheels within wheels in motion. 

On January 24 Belmont went to Wash- 
ington on the night train, and the next 
morning called upon Secretary Carlisle, at 
his office in the Treasury building. He de- 
scribed to the Secretary, with phrases 
clothed in black, the very serious financial 
situation in New York. He seemed greatly 
distressed, as indeed he genuinely was, and 
added that nothing could forestall a terrible 
crisis except the sale of Government bonds 
in Europe. Mr. Carlisle, who was more a 



162 J. PIERPONT MORGAN 

politician than a financier, privately thought 
that a sale of bonds at home would answer 
the purpose; without saying so, however, 
he begged Mr. Belmont to sound out the 
European market and let him know the re- 
sult. A few days later, he sent the Assistant 
Secretary, William E. Curtis, to see Mr. 
Belmont in New York. To Curtis had al- 
ways been entrusted such confidential mis- 
sions; many times in the year past he had 
jumped on a train and gone straight to the 
private offices of New York bank presidents 
to learn something of importance to the 
Treasury, or, more often, to level at them 
some reproaches for their lukewarm support 
of the Treasury in these trying times. But 
this was a more pregnant business, for when 
he parted from Mr. Carlisle the latter said : 
*^I have no instructions to give you. You 
know the situation. Do your best." The 
newspapers, which knew little, but sus- 
pected much, had their reporters trailing 
the Assistant Secretary from the time he 
stepped off the train; when he found him- 
self in Mr. Belmont's library, he felt meas- 
urably relieved. 
The banker laid open his private cables, 



TEEASURY CRISIS OF 1895 163 

and there was nothing good in them — 
nothing which, by any stretch, could be 
called good news when the attitude of Con- 
gress was recalled. No "coin" bonds were 
wanted — no courtesies extended to silver, 
positively not. An out-and-out gold bond 
would be considered by the foreign bankers ; 
but a majority of Congress wouldn't con- 
sider that. Mr. Belmont's correspondents 
were the Rothschilds, caliphs of money and 
credit across the sea. Nothing, in that di- 
rection, could be done without their help. 
Mr. Belmont was gloomier of aspect than 
before; in place of his own judgment, he 
now had positive information of the black- 
ness of the prospect. He advised Curtis to 
see Mr. Morgan in the morning, and the 
Secretarj^ left, promising to do so. 

Up to this morning — the thirtieth of 
January — Mr. Morgan had made no move. 
In the Street his attitude was a mystery; 
whenever the subject of gold shipments was 
mentioned a question was invariably asked, 
which no one could answer : ' ' What is Mor- 
gan doing?" But this morning he received 
two communications, one a note from Curtis 
asking him to come to the sub-Treasury for 



164 J. PIERPONT MOEGAN 

a meeting, and the other a cable from his 
firm in London, stating that the Rothschilds 
had called upon them and made the sugges- 
tion that the two firms should act together in 
conjunction with Mr. Belmont and the Mor- 
gan firm in New York, with a view to pre- 
venting, if possible, a catastrophe. Soon 
August Belmont walked into the office. He 
had received a corresponding cable. Mr. 
Morgan then told him that he was ready to 
act as had been suggested, and proposed 
that they should go together to see Mr. 
Curtis. They went. 

Curtis stated the situation, so far as the 
Treasury was concerned, and said that the 
Government desired to make such a nego- 
tiation as would secure the necessary gold 
for the Treasury. 

Mr. Morgan told him that in his opinion 
affairs had gone so far that a crisis had ar- 
rived, and there was now such a feeling of 
anxiety in the jDublic mind that it would be 
absolutely impossible to secure the gold by 
public advertisement; and further, miless 
a negotiation could be made for gold on the 
other side, he thought it would be useless. 
''So far as my own advices are concerned," 



TREASURY CRISIS OF 1895 165 

Mr. Morgan continued, ''I will frankly say 
that it is very doubtful whether the gold can 
be secured in Europe, but an attempted ne- 
gotiation is essential." 

Curtis asked them if they would under- 
take it provided the President and Secre- 
tary of the Treasury requested it. Mr. 
Morgan told him that he felt bound to do 
so, and that he was prepared to proceed 
upon a basis which he w^ould set down dur- 
ing the day, and which Curtis could take 
to Washington, and that from there he 
could let them know whether it was agree- 
able to the President and Secretary of the 
Treasury. 

That memorandum provided for a pri- 
vate contract as essential — no popular loan 
under any circumstances. Mr. Curtis went 
back to Washington. 

Up to this time nothing whatever had 
been said as to price. Mr. Morgan said 
afterward: "It was not really a question 
of price. It was a question of success." 
On Saturday Curtis brought back a favour- 
able answer from the Secretary; and the 
terms of a bond issue were proposed by the 
bankers. 



166 J. PIERPONT MOEGAN 

On the same day between five and six 
millions of gold were taken from the Treas- 
ury and sent to the steamers for shipment 
to Europe. There was less than a day's 
supply left. But toward evening a remark- 
able thing happened; the news that Mr. 
Morgan had taken hold, that something 
would be done, caused a sudden change of 
feeling in financial circles, and a large por- 
tion of this gold was removed from the 
steamers and sent back to the Treasury. 
A mere rumour accomplished this. But this 
was temporary; Blondin had started over 
Niagara on his tight rope — would he safely 
cross *? 

The press, aware that something extraor- 
dinary was on foot, took hold of the 
situation from the angle which naturally 
presented itself; the attitude of the press 
was suspicious. This secrecy was galling; 
something was said about "dark-lantern 
financiering," and it was asked if the Presi- 
dent were not delivering himself into the 
hands of the money interests, to make a 
profit for them at the expense of the nation. 
There was much talk about our grand na- 
tional resources, and what the people would 



TREASURY CRISIS OF 1895 167 

do if Congress gave them a chance to come 
to the rescue in this emergency. The New 
York World repeatedly declared that the 
President should put his foot down for a 
three per cent, loan; "if the banks won't 
take it, the people will." 

And Cleveland had more than a mind to 
put his foot down; perhaps he still had 
some faith in Congress. At any rate, he 
was determined to depend upon Congress. 
Carlisle, too, was somewhat in-**fhvour of a 
popular loan. Thus it came about that 
on Monday morning, when Mr. Morgan 
thought the matter practically settled, he re- 
ceived a letter from Mr. Carlisle informing 
him that the Treasury had decided to aban- 
don the private negotiation and to depend 
upon Congress for a popular loan. 

It was a blow. Mr. Morgan was abso- 
lutely convinced in his own mind that a 
popular call for gold at this time would 
only react disastrously upon the Treasury. 
Without a moment's delay the banker got 
into communication with Mr. Carlisle and 
urged him by no means to do anything until 
he and Mr. Belmont arrived in Washing- 
ton. The Secretary consented to wait a 



168 J. PIERPONT MORGAN 

day. Mr. Belmont started at once, on re- 
ceiving the news from Mr. Morgan; tlie 
latter left on an afternoon train. With him 
went his junior partner, Robert Bacon, and 
his lawyer, Francis Lynde Stetson ; Stetson, 
it will be remembered was a former partner 
of Mr. Cleveland. He had just returned 
to the city after an absence of some days 
when he received the summons from Mor- 
gan: *' There may be papers to be drawn, 
and I want you." The lawyer told Mor- 
gan that he felt so much interest in the mat- 
ter that he would go on foot if necessary; 
that he considered it a patriotic duty. 

In Washington, however, there were 
many and confusing views of patriotic duty 
at this moment. Senator Vest, for in- 
stance, was declaiming dramatically in the 
Senate: "The President has declared war 
upon silver!" Our grand national re- 
sources, the faith of the peoj)le, etc., were 
much to the front. Nevertheless, in spite of 
our grand national resources and the loyalty 
of the people, something definite must be 
done at once to fill the empty Treasury. 
Mr. Cleveland was a patriot, too, with the 
difference that, in his breast, theory was op- 



TREASURY CRISIS OF 1895 169 

posed by necessity. He was determined to 
make the Congress see its duty, and to force 
some action. This was his duty and his at- 
titude. 

Tuesday morning, Mr. Morgan, and Mr. 
Belmont, with Stetson and Secretary Car- 
lisle, called upon the President. Mr. Mor- 
gan, upon this occasion, did most of the 
talking; he and Cleveland were old ac- 
quaintances, having frequently met when the 
latter was engaged in law practice in New 
York after his first term at the White 
House. It had been Mr. Morgan's custom 
to drop in on the President for a pleasant 
visit whenever he went to Washington, and 
to smoke a cigar with hun. 

This m.orning, the atmosphere was very 
different. Between them existed a pro- 
found difference of opinion. Mr. Cleve- 
land was not a man to be carried off his 
feet by the personal force of another; he 
had made up his mind that he would leave 
the matter to Congress, and he would not 
change. Mr. Morgan, in his characteristic- 
ally intense and rapid manner, outlined the 
essential features of his own plan, and 
showed the necessity for each. To him it 



170 J. PIERPONT MORGAN 

seemed as clear as day that success de- 
pended upon selling bonds abroad; in no 
other way could gold be got for the Treas- 
ury which would not come from the Trea- 
ury itself. The President was unable to 
find a flaw in the banker's argument, but he 
was not convinced. He would not agree to 
do anything. The meeting broke up. 

A bill had been introduced in the House, 
authorising an issue of veritable gold bonds 
— not "coin" bonds, but bonds specifically 
payable in gold. The Springer bill, as it 
was called, had been kicking around the 
House for a long time; it was only neces- 
sary to mention it to loosen all the tongues 
of discord and set the cloud compelling 
orators to their work; platitudes about pa- 
triotism, our great wealth, the confidence of 
the people, gold, the badge of infamy, and 
the crime of '73, were offered by the demo- 
cratic majority, but no action which would 
put a dollar of gold where the Administra- 
tion needed it. On Thursday afternoon the 
bill was brought to a vote — and defeated. 
In regard to the failure of this bill, the New 
York World, the newsi3aper which took a 



TREASURY CRISIS OF 1895 171 

leading part in agitating the subject, said 
editorially : 

"The only thing left for the Administra- 
tion to do is to make a loan on the best 
terms obtainable. That these terms will be 
harsh and discrediting is due as much to the 
wilfulness and imbecility of Congress as to 
the incapacity of the Administration — that 
party leadership which is a part of its obli- 
gation to the voters who placed it in power." 

The situation, which had been held to- 
gether artificially by the strength of a mere 
rumour that a Morgan syndicate was about 
to take charge, was now practically without 
hope. This was Thursday afternoon, Feb- 
ruary 7. Sometime during the next day the 
Treasury would be forced to suspend pay- 
ment. Unless a miracle intervened, this 
was a certainty. 



CHAPTEE IX 

THE RELIEF OF THE GOVERNMENT 

THE negotiations with Mr. Morgan had 
been terminated. There had been no 
request to him to return to Washington. 
But he knew, as ahnost every other banker 
and every financier expert in the country 
knew, and as they knew abroad, that a crash 
could only be a few hours away. When the 
market closed and the withdrawals from the 
Treasury were reported on the news sheets 
he put on his coat and hat and, calling 
Bacon, left his office, passed without speak- 
ing through the knot of reporters that was 
gathered outside. Entering a cab, he went 
over the Cortlandt Street Ferry and started 
for Washington on the Congressional Lim- 
ited. Of course, the news of his starting 
was telegrajDhed to Washington. Just what 
his plan or purpose was, nobody knew, but, 
he has since expressed it, he felt that it was 
his "duty to go down and see the President 

172 



EELIEF OF THE GOVERNMENT 173 

once more," although he had not been 
bidden to do so. 

When he got off the train in Washing- 
ton, to his surprise he was met by Daniel 
Lamont, the Secretary of War, who in- 
formed him that his coming to Washing- 
ton had been reported and that whatever 
his errand was it was only fair for him to 
know that the President had not changed 
his attitude about the responsibility of Con- 
gress for the situation; he would not con- 
sider a private bond sale and he would 
not see Mr. Morgan. After Mr. Lamont 
ceased speaking, Mr. Morgan told him that 
he had come to Washington to see the Presi- 
dent, that he was going to the Arlington 
Hotel and tcould stay there until he saw 
him. Hailing a cab, he jumped into it and 
drove to the hotel with Bacon. 

The news of his arrival was quickly 
noised around and immediately the Treas- 
ury officials, leaders in Congress and others 
familiar with the situation, came to see him. 
They all knew the state of the Treasury, 
and all told the same story about the impos- 
sibility of getting any action up at the 
Capitol. It was the Silverite's opportu- 



174 J. PIERPONT MORGAN 

nityl It was their chance to see gold dis- 
credited and (as they thought) in the wreck 
that would follow, to put into practice their 
own theories. Every caller dilated on the 
perils of the situation and unloaded the bur- 
den of his own fears on Mr. Morgan; but 
no one made any suggestions. 

All the evening, this sort of reception 
went on. Mr. Morgan sat and listened and 
smoked and said nothing. It was after mid- 
night when the last of these callers left, and 
finally Bacon went to bed, leaving Mr. Mor- 
gan still working out a game of solitaire. 
The people in the hotel said later that his 
light was not extinguished until after four 
o'clock. It was not only a problem involv- 
ing clubs, spades, and diamonds, that he was 
engaged in — there was only one day's sup- 
ply of gold left in the United States Treas- 
ury and a plan had to be worked out to save 
the Nation's credit. The morning of the 
next day was not auspicious. The sk}^ was 
dark, and there was a big snowstorm blow- 
ing. While Mr. Morgan and Mr. Bacon 
were breakfasting together, about half-j)ast 
nine o'clock, the financier told his junior 
partner of the plan that he had evolved the 



EELIEF OF THE GOVERNMENT 175 

Bight before over his game of solitaire. He 
remembered that when he was a yoimg man, 
during the Civil "War, Lincohi had had to 
face the crisis of an empty Treasury, and 
that in the emergency Salmon P. Chase, 
then Secretary of the Treasury, came on to 
New York and called a conference of the 
leading bankers to devise ways and means 
of getting gold for the Government. As 
a result of these conferences, the Secretary 
telegraphed the President to try to keep 
Congress in session until he should return, 
and he then took the first train back to 
Washington. When he got there he found 
that Congress had already adjourned for 
the day at the time his message was received 
at the White House, but the next morning 
President Lincoln submitted the matter to 
the National Legislature and an act was 
passed empowering the Secretary of the 
Treasury to iDurchase gold whenever the 
Government needed it, and to pay for it in 
any authorised obligations of the United 
States Government, at the best price that 
the Secretary could make. 

Mr. Morgan told Mr. Bacon that as he 
recalled it, this act, which had been ap- 



176 J. PIERPONT MORGAN 

proved by Lincoln, was still on the statute 
books, and that he had been familiar with 
its operations in 1862 because gold had been 
sold to the Government by the house with 
which he was then connected. He thought 
the act was, as he expressed it, "Section 
number four thousand and something of the 
Revised Statutes," and that if the act had 
not been repealed or amended by one of the 
many bills passed in connection with re- 
sumption, it might still be in effect and 
might prove of value in the present emer- 
gency. 

Before they had finished their meal, they 
began to receive reports of the opening of 
business in New York and learned that the 
run on the Treasury continued. That same 
information must have been received at the 
same time by Secretary Carlisle in the 
Treasury Department, as well as in the 
White House. The telephone rang and Mr. 
Bacon received a message to the effect that 
the President would see Mr. Morgan. Not 
even stopping to light his customary after- 
breakfast cigar, the financier started with 
Bacon across Lafayette Square, for the 
White House. Arriving there, they found 



RELIEF OF THE GOVERNMENT 177 

that Secretary Carlisle, Attorney-General 
Olney, and other members of the adminis- 
trative family had already joined the Presi- 
dent. 

The President's greeting was very short 
and formal. Mr. Morgan looked at him 
and saw that he was not smoking, so he did 
not light his own cigar. He and Bacon sat 
down at what was destined to be a mem- 
orable conference. The Secretary of the 
Treasury gave the latest reports of the con- 
dition of the Sub-Treasury in New York, 
where the fight was centred. Mr. Cleve- 
land reiterated his determination not to 
consent to a sale of Government bonds to a 
syndicate of bankers or otherwise. He dis- 
cussed the situation with his official advisers 
while Mr. Morgan and Mr. Bacon sat as 
spectators to the scene. This discussion 
lasted for some time. Meanwhile, there 
were handed to the Secretary of the Treas- 
ury bulletins concerning the situation, which 
he read or turned over to the President. 

The minutes grew into hours. What 
was being told to the group in the White 
House was known in the banking world. 
Other firms and individuals might take 



178 J. PIERPONT MORGAN 

steps to provide against the apparently in- 
evitable crash, but Mr. Morgan, with all 
that he had at stake, sat quietly and listened. 
He was not asked to make any suggestion. 
The President was striving with his own 
advisers to find a way out of the difficulty 
and still held to his determination to do it 
without assistance from Wall Street, if pos- 
sible. At last, however, a memorandum 
taken from a telephone message showed that 
there were but nine million dollars of gold 
left in the New York Sub-Treasury. And, 
at this point, Mr. Morgan broke his silence. 

He said: ''Mr. President, the Secretary 
of the Treasury knows of one check out- 
standing for twelve million dollars. If this 
is presented to-day; it is all over." 

Mr. Carlisle had told him the evening be- 
fore at the hotel about this check. He had 
had it in his mind every minute since that 
time. The Secretary confirmed this state- 
ment at once and the President then turned 
to Mr. Morgan for the first time and said: 
''Have you anything to suggest^" 

To this man who is accustomed to taking 
the initiative in things, to saying "do this," 
"do that," it had been an ordeal to sit si- 



EELIEF OF THE GOVERNMENT 179 

lent and inactive that morning at the White 
House. When he began to speak, he talked 
rapidly. He told the President of his recol- 
lection of that "Section number four thou- 
sand and something" of the United States 
Statutes. He explained that he did not 
know whether it was still in force and that 
he had not seen it or read it for probably 
thirty years, but that if it was still effective, 
then it gave Secretary Carlisle the same 
power that Secretary Chase had had and 
would prove of equal benefit to the Govern- 
ment in its present distress. 

At a word from the President, Attorney- 
General Olney stepped out of the room and 
in a moment returned with the book of Re- 
vised Statutes. He told the President that 
what Mr. Morgan had said was perfectly 
true, that this act was known as "Section 
No. 3700," and that from a casual examina- 
tion he thought it was still in force. Mr. 
Cleveland quietly took the book from his 
hand and with deep concentration read the 
act to himself. Here it is, as it was passed 
on March 17, 1862 : 

^'The Secretary of the Treasury may 
purchase coin with any of the bonds or notes 



180 J. PIERPONT MOEGAN 

of the United States authorised by law, at 
such rates and upon such terms as he may 
deem most advantageous to the public in- 
terest.'* 

Everyone in the room sat in the silence of 
deep suspense. When the President had 
concluded the reading of the section, he 
laid the book slowly on his desk and then his 
face lighted up with almost a smile of relief 
and he said: "Mr. Morgan, I think the act 
is ample for our needs and that it will solve 
the situation." 

The tension was broken. 

In the rapid fire of question and answer 
which followed, the President with Mr. 
Morgan became the centre of a discussion 
wdth his official family as to the steps that 
should be taken to secure the benefit of the 
act. The Attorney-General left to make 
a further and fuller report on the law. 
The President then took up with Mr. Mor- 
gan the terms under which he, as repre- 
senting a syndicate, would furnish the gold 
the Government needed. Mr. Morgan's 
suggestion was that the Government should 
purchase enough gold to result in placing 
a hundred million dollars in the Treasury, 



EELIEF OP THE GOVEENMENT 181 

but the President thought that it would be 
wiser to purchase a specific number of 
ounces, and after consultation with the Sec- 
retary of the Treasury and his lieutenants, 
decided upon three and a half million ounces. 
The question of terms and price then was 
discussed and finally settled at $17.80 per 
ounce, which would result in placing about 
sixty-five millions in the Treasury, the Sec- 
retary feeling that this would be sufficient. 
All had gone well up to this point, when the 
President's face became very grave. He 
said: 

''How about this drain of gold abroad? 
Suppose the Government does purchase 
this gold from the bankers and it is im- 
mediately withdrawn from the Treasury 
and sent abroad. Can you guarantee that 
such a thing will not happen?" 

There was no time for Mr. Morgan to 
consult with any members of his proposed 
syndicate. It was evident from the Presi- 
dent's tone that he considered some such 
guaranty essential to the success of the plan. 
Could Mr. Morgan stop the foreign ex- 
change houses from taking their profit by 
exporting gold? He, and he alone, had to 



182 J. PIERPONT MORGAN 

decide tliat question then and there, and 
without a moment 's hesitation he said : 
*'Mr. President, I will so guarantee." 
*'A11 right," said the President. "It is 
now two o'clock, and you gentlemen had 
better all go out and get some lunch, while 
I formulate the terms of the plan for trans- 
mission in a message to Congress so as to 
send it up to the Capitol without delay." 

As all rose from their seats, someone 
said: ''Mr. Morgan, what is that brown 
powder on your trousers and clothes and 
all around your chair?" He looked down 
quickly. It was his after-breakfast cigar 
that he had been holding in his hand un- 
lighted as he entered the room and which, 
as he had sat there, he had unconsciously 
ground to i^ieces. The President laughed, 
and reaching for a box of cigars, told Mr. 
Morgan that it was tune for him to have a 
smoke and added that he wished Mr. Mor- 
gan would remain while he dictated the spe- 
cial message in order to see if it incorpo- 
rated all the details of the plan. The others 
left and Mr. Cleveland smnmoned his secre- 
tary and dictated the message which was 
sent to the Capitol that afternoon. 



RELIEF OF THE GOVERNMENT 183 

In the contract it was arranged for the 
Government to pay for this gold in four 
per cent, bonds; not gold bonds, but ^^ paya- 
ble in coin of the standard value." By this 
transaction the Goverimient would receive 
gold worth $65,317,500 and would issue 
in payment $62,317,500 worth of bonds, 
the difference in the amounts representing 
the premimn on the bonds. As these were 
to run thirty years, this premium would 
make the price equal to 104.49 and the rate 
of interest three and three-fourths per cent. 

Mr. Cleveland, in his message, pointed 
out that the situation had rendered immedi- 
ate executive action a necessity. After out- 
lining the contract made, he pointed mark- 
edly to one of its provisions, in which the 
Government was given the privilege of 
substituting within ten days straight three 
per cent, gold bonds at par, *'if the same 
shall be authorised by Congress," in place of 
the four per cents, payable in coin, payable, 
that is to say, either in gold or silver. Ac- 
tion by Congress on this provision would 
save the country more than sixteen millions 
in interest money. The President urged 
Congress to take advantage of the offer thus 



184 J. PIERPONT MORGAN 

simply and flatly laid before it. But the 
majority in Congress considered the distinc- 
tion made by the bankers between coin and 
gold as abitrary, invidious; they flouted it, 
in the name of silver, and cast away the 
sixteen millions. 

If Mr. Cleveland had been the obstinate 
man that some of his critics depict him, 
he would have refused to accept relief 
from any source except Congress, upon 
which he had rightly placed the responsi- 
bility for the situation. If he had been a 
timorous man, he would have shrmik from 
the certainty of criticism of a plan which, 
although it was not a bond sale to a syn- 
dicate or to private parties, in effect put a 
large issue of Government obligations in 
the hands of bankers in return for gold. 
Being a trained lawyer, he recognized that 
Mr. Morgan's plan was no new idea. It 
was merely relying on a statute of the 
United States which had stood the test of 
experience and which had been adopted for 
the purpose of serving the Government in 
just such a crisis as had arisen. In this de- 
termination to put the responsibility on 
Congress so long as there was a doUar in 



RELIEF OF THE GOVERNMENT 185 

the Treasury, he was steadfast. In his pa- 
tient consideration of the situation with his 
official advisers before seeking outside aid, 
he showed himself to be the strong man, 
the painstaking executive, that his public 
career has amply proved him to have been. 

His proverbial stubbornness was shown 
in the way in which he met the unfair at- 
tacks of his political foes and the spiteful 
charges of the disappointed Silverites. 

The gist of the special message was in the 
late news of the evening papers. It was 
known broadcast that Mr. Morgan was at 
the White House. That was Friday even- 
ing. The Trans- Atlantic liners were to sail 
the next day, and, that night, eighteen mil- 
lions in gold, which had been put on board 
for shipment, was taken out of the strong 
boxes of the ships and guarded mitil the next 
morning, when it was brought back and de- 
posited in the Sub-Treasury in Wall Street. 

The Government had done its part and 
Mr. Morgan returned at once to New 
York to take up the important task of stop- 
ping the outflow of gold. His plan was to 
offer the men who were shipping the gold 
an equal or a better profit by refraining 



186 J. PIERPONT MORGAN 

from shipments and participating in the 
bond issue. The preliminary agreement 
which he signed in Washington, and which 
was afterward signed by Mr. Behnont, 
who had been delayed in getting there on 
account of the snowstorm, provided for a 
sjTidicate of which Morgan and Belmont 
were managers, to take the bonds and fur- 
nish the gold. Gold shipments dropped 
immediately from several millions a day to 
thirty or forty thousand. The emergency 
had been met and the credit of the country 
saved. 

The danger, however, was no sooner 
passed than violent criticism broke out 
against the means by which relief had been 
obtained. It was said that the gold pur- 
chase contract was the hardest kind of 
'^ squeeze." The secrecy surrounding the 
whole affair inflamed suspicion. The im- 
mediate rise in value of the bonds issued to 
pay for the gold seemed to justify some of 
the assertions that were made. If these 
critics were right in the broad sense that a 
negotiation of this sort between a great gov- 
ernment and private bankers was an unideal 
thing, they were wrong m attacking the 



RELIEF OF THE GOVERNMENT 187 

motives and purpose of the men immediately 
concerned. When they ignored the fact 
that in giving his guarantee to stop the 
drain, Mr. Morgan risked the resources not 
only of himself, his friends, but also of his 
financial allies, they were unfair. When 
they ignored, with their suggestions of what 
might have been done, the actual stubborn 
difficulties of the real situation, they were 
talking in the air. 

At bottom, the contract amounted to 
this: The Government took a partner 
who agreed to furnish it with gold, not 
its own gold juggled from the Treasury, but 
other gold ; and who agreed to put an end to 
the unnatural run upon the Treasury. In 
return for these services, both imusual and 
without precedent, the Government agreed 
upon a rate of interest unusually high. It 
was in this comparatively high rate of in- 
terest that Morgan, as manager of the busi- 
ness, found, not so much his own profit, as 
the leverage which was to enable him to con- 
trol the situation. Very soon after the 
signing of the contract a sjoidicate was 
formed to take up the bonds; Morgan and 
Behnont constituted themselves managers, 



188 J. PIERPONT MORGAN 

and they put. down on the list the names of 
such banks and bankers, dealers in ex- 
change, and even bullion houses, as they 
thought would make the strongest combina- 
tion. The object of the managers was to 
draw a close circle around the National 
Treasury, and by controlling the price of 
exchange, prevent any further raids upon 
the reserve. All of the subscribers came in 
under an agreement to furnish gold equal 
to the price of their bonds, and under the 
specific agreement not to obtain any of it 
from the United States Treasury. The 
bonds were allotted to the members of the 
sjmdicate at the Government's price and 
were offered to the iDublic at 112 and a frac- 
tion. The managers disposed of one half 
the entire issue in America on these terms, 
the other half being placed in Europe on 
terms not quite so good. As the bonds aft- 
erward rose in value to 120 the sjnidicate 
managers were in the position of having 
made money for all the subscribers. This 
insured the success of their campaign, and 
as the bonds were not all issued at once, but 
from time to time, as fast as the gold was 
needed, by the Treasury, the managers re- 



EELIEF OF THE GOVERNMENT 189 

mained in the strong position of having val- 
uable favours to dispense to any houses 
which proved hostile and attempted to work 
against them in the market. 

How this novel combination of financial 
forces, engineered throughout by the brain 
of Mr. Morgan, gained control of the ex- 
change market, and, through a period of 
eight or nine months, retained control and 
continued to pile up a reserve in the Treas- 
ury, thus insuring the solvency of the cur- 
rency and the safety of business, is, perhaps, 
a matter too recondite to prove generally in- 
teresting. In the beginning, as the enterprise 
was floated along by the natural reaction of 
an oversold market, there came a time in 
the middle of summer when things agam 
looked critical, when the simple process of 
piling up a balance on the other side of the 
ocean by selling American securities in order 
to keep down the price of exchange became 
almost worked out ; some rapid cabling then 
took place between Mr. Morgan in Paris 
and Mr. Bacon at the Morgan office in Wall 
Street. But when the syndicate wound up 
its business affairs in the autumn, the gold 
reserve stood well over the required hun- 



190 J. PIERPONT MORGAN 

dred millions, and the object had been at- 
tained. 

The charge has so often been made that 
Mr. Morgan gained an enormous personal 
profit in this transaction that almost any 
other man would have spoken in his own de- 
fence. Whenever the subject was alluded 
to in his presence it simply irritated him. 
He never thought of meeting the public half 
way with an explanation. When a news- 
paper accused him of having made millions 
out of the Government he would toss the 
paper aside contemptuously without a re- 
mark. But some few utterances were ob- 
tained from him in a later investigation of 
the bond sale — the more or less precious 
and significant, because rare, remarks of a 
silent and unexplanatory man. A dialogue 
between Mr. Morgan and Senator Piatt of 
Connecticut and afterward Senator Vest 
contains it all. Senator Piatt begins by 
questioning Mr. Morgan on the vexed point 
of his opposition to a popular loan, which 
brought him and Mr. Belmont in such haste 
to Washington : 

Senator Platt — Why did you not want to have 
an issue of bonds after you had commenced your 



EELIEF OP THE GOVERNMENT 191 

negotiations? You asked the President not to issue 
a bond call. What was your reason for doing that? 

Mr. Morgan — Because I knew that if the call was 
made the public would understand that the foreign 
negotiation had been abandoned. 

Senator Platt — When it was understood that you 
were negotiating, shipments ceased ? 

Mr. Morgan — Absolutely; and they did not com- 
mence until a month afterward. 

Senator Platt — And so your real purpose, as I 
understand you, in this transaction was not the idea 
that you could take this bond issue and make money 
out of it, but that you could prevent a panic and dis- 
tress in the country. 

Mr. Morgan — I will answer that question, though I 
do not think it necessary, in view of all that I have 
done. I will say that I had no object except to save 
the disaster that would result in case that foreign 
gold was not obtained. 

Senator Vest — If that was your sole object, why 
did you specify in your telegraphic communication to 
Mr. Carlisle that your house, or you and Mr. Belmont, 
were to have exclusive control of the matter? 

Mr. Morgan — Because it was absolutely impossible 
for more than one party to negotiate — to make the 
same negotiation for the same lot of gold. It would 
only have made competition. 

Senator Vest — If the gold was abroad I take it 
for granted that anybody could get hold of it who 
had the means to do so. If you were actuated by the 
desire to prevent a panic, why were you not willing 
that other people should do it, if they wanted to? 

Mr. Morgan — They could not do it. 



192 J. PIERPONT MORGAN 

They could not do it. 

To Mr. Morgan this was simply a matter 
of fact. He could. He did. There was 
nothing more to be said. No part of his 
duty, as he saw it, consisted of talking about 
what he had done, or defending himself. If 
you should inquire of Mr. Morgan how 
much he made, he would probably reply: 
"Ask the members of the syndicate." He 
personally would no more remember to-day 
what the figure was than he remembered 
the exact section of the law — which he re- 
called as "Number four thousand and 
something." His profit must have been 
the share of his firm in the total profits of 
the syndicate — plus his o^ti conmiission for 
management, which did not exceed the ordi- 
nary banker's commission. 

The year after the bond contract, when 
the newspapers were attacking him on this 
accomit, a friend, who was walking with 
him, asked him the question direct. Mr. 
Morgan did not answer. After a while he 
turned to a fox terrier which was trotting 
behind them, and asked: 

"What do you think of the dog?" 



RELIEF OF THE GOVERNMENT 193 

The other looked at the fox terrier, and 
made some casual answer. 

''Take another look at him," insisted 
Mr. Morgan, calling the dog up to him. 

His friend looked again and then he saw 
an inscription written on the collar: 

''EMERGENCY. Presented by Au- 
gust Belmont to J. P. Morgan as a souvenir 
of February, 1895." 



CHAPTER X 

UNITED STATES STEEL 

SIX years later Mr. Morgan created the 
United States Steel Corporation; the 
flotation of the "billion dollar trust," as it 
was called, caught the eye of the public the 
world over. It was, and remains, still, the 
greatest and most characteristic Morgan en- 
terprise; an enormously complicated piece 
of business in the beginning, of which only 
the motive for doing it was simple and un- 
complicated. The motive was the elimina- 
tion of Carnegie from the steel industry. 
This was the starting point of the whole 
enormous transaction. 

It will be no news to a waiting world to 
declare that Mr. Morgan does not give, or 
attend, lectures of any kind, whether writ- 
ten or sonorously shouted, that he seldom 
makes speeches or listens to long ones, that 
he is equally remiss in exploiting his own 
** views" and in waiting upon others who 

194 



UNITED STATES STEEL 195 

are exploiting theirs. He does not differ in 
this particular trait from most of his gen- 
eration who have brilliantly succeeded in 
practical affairs, to whom talk, argument, 
agitation, leading neither to pure pleasure 
on the one hand, nor to a '* proposition" on 
the other, are simply against nature. The 
late Abram S. Hewitt, when he was asked to 
contribute money to charity, used to request 
a long report, going into all the details, pros 
and cons, of the matter in hand; he would 
study this report, and afterward give his 
decision. This is proof that Mr. Hewitt 
was not as our most modern multi-million- 
aire financial Titans are; he was an old- 
fashioned business man become rich in the 
days when the game w^as not less absorbing, 
but relatively less momentous and not yet 
imperial; who felt out of place in the first 
directorate of the Steel Trust, and who was 
bred a school teacher. No one would ex- 
pect Mr. Morgan to fasten his mind on any 
sort of jog-trotting dissertation and to offer 
his subscription forthwith. 

The matter would be brought about quite 
differently — how is not to be related at this 
moment, though very interesting and very 



196 J. PIERPONT MOEGAN 

significant. Mr. Morgan, in Ms capacity 
of industrial fire-bringer to a coming gener- 
ation of capitalists, seems to have per- 
formed his enormous labours without plan, 
map, or time table, except such as he carried 
in his head. Instinctive, his friends call 
him; they never lose an opportunity of ex- 
pressing their genuine awe at his power of 
instantaneous decision, manifested, in the 
midst of the most bewildering welter of af- 
fairs. From which it is clear that Mr. 
Morgan always knows exactly what he 
wants, and that his character works through 
his mind and governs its operations without 
friction or debate anj'^vhere within. With 
that character and mind he felt and dis- 
covered long ago that competition is 
waste, is war in its worst effect; that when 
business men jump into a fight with one 
another, using capital for powder and mus- 
kets, they are destroying not only them- 
selves, but also the goods of the world. Mr. 
Morgan found this out long before the econ- 
omists got hold of it; it came to him di- 
rectly; for his o\Yn mone}^ — he had inher- 
ited ten millions from his father — and the 
money for which he stood in a way respon- 



UNITED STATES STEEL 197 

sible as investing banker was drained away 
at times in this hopeless channel. There- 
fore, in any practical case presented to him, 
Mr. Morgan never found himself in doubt as 
to what to do, since most questions finally 
resolved themselves into a choice between 
doing something which would injure the 
value of an investment, and doing some- 
thing which would increase that value and 
tend to make it permanent. 

Seldom as he has expressed it in words, 
Mr. Morgan has stood in a unique way for 
the principle that capital must always or- 
ganise and do away with internal friction, 
war, waste, among its factors and segments. 
He has been the great Progressive among 
capitalists, and brought his ideal into ex- 
istence without verbal agitation, but by a 
succession of powerful deeds. Whether he 
is a progressive in the broad sense depends 
upon whether you think the changes of the 
past twenty years are an improvement in 
the condition of the country or otherwise. 
Our purpose is to relate the life of Mr. Mor- 
gan without introducing political discus- 
sion. But it is impossible to write that life 
without stating the simple observation that 



198 J. PIERPONT MORGAN 

is inevitably to be drawn from any study 
of his career, namely, that he has always 
and everywhere worked to bring about the 
strengthening of the power of invested cap- 
ital, and that this has been his life accom- 
plishment. Through him more than 
through any other human agency business 
has become imperial, and from this the po- 
litical question is made. 

In the United States Steel Corporation 
we have an enormously powerful and ef- 
ficient engine of industry, of the most mod- 
ern character in the world. It is as unlike 
an old-fashioned American business of half 
a century ago as Peter Cooper's apple bar- 
rel engine was like the fleckless steel won- 
der that draws the Twentieth Century Lim- 
ited; except that it has attained a feudal 
character in its relations with labour that 
does indeed hark back to an even simpler 
day. Much is known about the Steel Trust, 
almost everything, indeed, that is of much 
importance, except what will never be 
known — its trade secrets, so to s^Deak, such 
as the actual cost of production and the 
foundation for the prices it makes and 
maintains for its products. But the Steel 



UNITED STATES STEEL 199 

Trust takes a new and fresh interest when 
looked at from the viewpoint of a life of 
J. P. Morgan. He made it. This is not 
saying he made everything about it — Kelly, 
the Kentucky iron maker, who discovered 
the use of the air blast, Bessemer, Mushet, 
Ward, Hewitt, Jones, Carnegie, Frick, 
Schwab, Corey ; and then the Amalgamated 
Association of Iron and Steel Workers; 
and then the coming of the Steel Age, steel 
cities, subways, ships, armour plate, furni- 
ture, the element of steel entering into al- 
most every commercial calculation of size 
and importance ; and then the crowding into 
Pittsburg of tons and tons of fresh, muscu- 
lar, solid human flesh from the backward 
districts in Europe — Hungary, Poland, 
Russia — ^provided with little brain but 
brute strength for the making of steel — all 
these and many more than need be men- 
tioned of surging forces have come together 
to make the Steel Trust possible and to 
make it what it is. Nevertheless, it is 
worth while to think it the incarnation of 
Pierpont Morgan. In its way it is the best 
expression of his idea, of the idea of his life, 
there is. From its birth ten years ago till 



200 J. PIERPONT MORGAN 

now it has been a monument to liim, the 
truest creation, all alive and forging power- 
fully on its course, of his own will. 

In the year 1900 Andrew Carnegie was 
a very rich man, as he is now; but then he 
was chief of the turbulent kingdom of steel, 
and it was essential in the very nature of 
the competition of that time that he should 
struggle and fight with all the enormous 
power of his wealth and alliances to keep 
his place at the head. If he had not been 
willing to throw a million-dollar steam 
hammer on the scrap heap to make way for 
a better tool, if he had not sprung at the 
throat of each rising competitor and fought 
every transportation company that strove 
to make any money out of him, then he 
would have given ^Dlace to a new Carnegie 
with a different name. One of the shrewd- 
est and most audacious of men in his own 
way, Andrew Carnegie had no mind for 
that inglorious end, and when the great 
Pennsylvania railroad refused to allow him 
greater rebates for carrying his iron and 
steel goods from Pittsburg to the sea, he re- 
torted that he would build his own railroad. 
The surveys were actually made. Just 



UNITED STATES STEEL 201 

when Mr. Morgan and his friends were in a 
position to tell themselves, after innumer- 
able costly reorganisations, bankruptcies 
and rate wars, that the building of hostile 
competing lines was over, for good and all, — 
here was Carnegie's proposal. He was in- 
dependent, did not have to seek his capital 
in Wall Street; no one could prevent him 
from doing what he pleased. 

At about the same time Carnegie seems 
to have started out to make a clean-up in 
the steel business, for he proceeded to start 
so many irritating and alarming enterprises 
at once that the whole financial world took 
fright. Within a few days announcements 
were made that the independent Carnegie 
railroad to tidewater would be soon begun, 
that a new $12,000,000 steel plant would 
be constructed at Conneaut, O. ; that a sheet 
steel plant would be established at Du- 
quesne, that a big shipyard and dry dock 
would be built at Conneaut, not to speak of 
intimations that the Carnegie company was 
about to enter fresh fields of steel manufac- 
ture. 

Carnegie wanted someone to buy him out, 
— as he had made up his mind to retire ; but 



202 J. PIERPONT MORGAN 

instead of sitting down and waiting for of- 
fers, he dashed out and built bonfires all 
around the enemy's camp. It has been said 
that millionaires, when they are frightened, 
run to J. P. Morgan like chickens to the 
mother hen. Something of the sort cer- 
tainly took place upon this occasion. He 
was the only man able to deal with a situ- 
ation of this kind. He had the brain and 
he had the money; not his oaati money, but 
money as good as his, which would instantly 
flow to him out of respect for the workings 
of that brain. 

Mr. Morgan was not the originator of 
the idea out of which developed the United 
States Steel Corporation. His early rela- 
tion to the proposition was chiefly that of a 
banker, but a banker upon a scale without 
precedent in the history of industry. Vari- 
ous claims have been made in support of 
the statement that this or that man was the 
first to plan the United States Steel Corpo- 
ration. In all probability, however, the 
proposition represents an evolution rather 
than a distinctly original idea. 

The first concrete conception of the or- 
ganisation was that of John W. Gates, of 



UNITED STATES STEEL 203 

tlie Steel Wire Corporation; in the latter 
part of the last century Gates tried to es- 
tablish a community of interest, a sort of 
international trust, in which certain steel 
and iron manufacturers of Germany were 
to join with the steel and iron manufactur- 
ers of the United States, for the purpose 
of fixing prices and apportioning markets 
to the manufacturers of each nation. In 
this attempt was the germ of the United 
States Steel Corporation. 

There were other considerations besides 
that of averting a steel war that appealed 
to Mr. Morgan, With the first inauguration 
of President McKinley there came an im- 
provement of agricultural and financial con- 
ditions throughout the United States. The 
silver question had been eliminated. The 
currency system of the United States had 
been declared by law to stand exclusively 
upon the gold basis. A disastrous proces- 
sion of lean years came suddenly to an end. 
In 1897 we had a very favourable inter- 
national trade balance. In 1898 that bal- 
ance was unprecedently large. There had 
been another failure of the wheat crop in 
Europe, while our own wheat harvest was 



204 J. PIERPONT MORGAN 

unusually good. England's demand upon 
us for cotton was almost unprecedented. 
Our exports touched higli water mark. 
Railroads were beginning to feel the effect 
of this prosperity. The farmers of the 
West began paying off mortgages, for the 
balance upon the year's transactions was 
largely in their favour. Money began to 
flow to the United States from Europe; 
and in 1899 we received from Europe one 
hundred millions in gold, in part payment 
of international trade balances. 

The best estimate is that, between 1897 
and 1901, the United States easily absorbed 
about a thousand millions of American rail- 
way securities, which had been for years 
held in Europe, and still there were large 
accumulations of money left. 

The abundance of money capital created 
as a result of the successful reorganisa- 
tion of railways, largely done under the 
leadership of Mr. Morgan, and the lesson 
which the abler business men had by that 
time begun to learn, — namely, that the true 
philosophy upon which large corporate un- 
dertakings must be based if they were to be 
successful, consisted in adopting such meth- 



UNITED STATES STEEL 205 

ods as would make it possible to secure the 
largest output of product of highest qual- 
ity at the smallest cost. This involved the 
use of the highest grade of labour-saving 
machinery, the employment of a percentage 
of skilled artisans to whom high wages were 
paid, and the harmonising of plants so that 
the cost of transportation of raw materials 
to the factories, and of the product of the 
factories to the markets, would be reduced 
to the lowest point possible. 

These were considerations which, when 
presented to Mr. Morgan, were instantly 
grasped and judged by that special intuitive 
talent which has always been his. For 
the most part his entire career, outside of 
ordinary banking, was associated with the 
reorganisation of railroads. He had had 
comparatively little experience of that kind 
in connection with corporations engaged in 
manufacture. He was not identified, except 
possibly as a banker, with either of the two 
huge corporate combinations then existing — 
the Sugar Trust and the Standard Oil Com- 
pany. 

To succeed, a combination of this kind 
had to be far-reaching, national in its scope. 



206 J. PIERPONT MORGAN 

It must include ten or twelve corporations, 
each one of which was represented by capi- 
tal stock running from fifty millions to 
nearly a hundred millions; and the whole 
undertaking necessarily called for the as- 
sistance of one masterly financial construct- 
ive genius, whom millions did not appal 
merel}" from the size of the figures. 

Mr. Morgan was apparently the man for 
the work, the single individual who could, if 
he would, bring an undertaking of that kind 
to a successful conclusion. Therefore he 
was appealed to, to undertake the financial 
promotion of what, if successful, was to 
be the world's greatest industrial corpora- 
tion. 

Through the greater part of 1900 the 
preliminary statements upon which the or- 
ganisation of the Steel Corporation was to 
be based were in the course of preparation. 
As a whole they embodied a mass of sta- 
tistics, figures representing capital, bonded 
indebtedness, income and cost of operation 
and the like, of the several corporations 
which were to be included in the Steel Cor- 
poration, which, as a whole, exceeded any 
other statements ever made to Mr. Morgan, 



UNITED STATES STEEL 207 

in the magnitude of the capital and other 
money dealings involved. 

Mr. Morgan was never staggered, either 
by the mass of detail or the aggregate sum 
which this combination would represent. 
He went, in every instance, to the heart 
of the matter, seeming to read intuitively 
into the vitals of every statement. No 
man in the United States was ever able so 
quickly to analyse a balance sheet as Mr. 
Morgan then was and now is. He grasped 
instantly the meaning that lay behind the 
figures, that told of the operation, the in- 
come and the methods of the Carnegie 
Company. His miad looked into the fu- 
ture; and he had a perfect understanding 
of some of the chief savings that might be 
effected by a combination of this kind. For 
instance, such a combination would natu- 
rally bring to the great steel producing 
plants of the Mississippi Valley the com- 
mand of the market of that valley. 
Thereby the cost of transportation from 
the plant to the market would be greatly re- 
duced, since orders obtained from that mar- 
ket would naturally go to the nearest man- 
ufacturing plant. * 



208 J. PIERPONT MORGAN 

He felt that a combination of this 
kind would, so far as the West at 
least was concerned, make the steel cor- 
poration practically independent of any 
tariff. Or, in other words, whatever tariff 
rates upon iron and steel products might 
he satisfactory to independent producers 
would be entirely satisfactory to the con- 
templated corporation. He pointed out the 
importance of procuring practically perpet- 
ual leases or ownership of the great ore 
fields of Northern Minnesota; and the re- 
cent establishment of the steel city of Gary 
at the head of Lake Michigan was due to 
suggestions which were made by Mr. Mor- 
gan when the organisation of the steel cor- 
poration was under consideration. 

Also the charter of the company must 
contain franchises which would permit the 
corporation to do many kinds of business 
outside the strictly technical limitations of 
the manufacture of iron and steel prod- 
ucts. Mr. Morgan believed that the char- 
ter should contain a franchise to own and 
develop lands containing coal or iron or 
any other mineral product utilised in the 
manufacture of steel, and, in fact, cover- 



UNITED STATES STEEL 209 

ing all possible mining except that of the 
precious metals. The corporation should 
have the right of franchise to build ships, 
machinery, bridges, all kinds of vehicles 
needed for transportation, even aqueducts 
or canals, if these should be found essential. 
It was to have the right to deal in patents, 
to engage in any kind of manufacture or 
transportation, and to possess certain rights 
of eminent domain, at least within the State 
from which the corporation articles were to 
be obtained. It would be necessary for it 
to have the right to do certain kinds of 
banking business. The suggestions made 
by Mr. Morgan, together, of course, vnth 
those made by others and approved by him, 
were afterward embodied in one of the 
broadest operative charters ever granted by 
a State. 

There remained nothing but the financing 
of this corporation. Very likely Mr. 
Schwab, Judge Gary, John W. Gates, or 
any one of half a dozen of those who were 
directing the management of the Carnegie 
Company, could have worked out a 
thoroughly practical combination upon the 
side of manufacture and management, but 



210 J. PIERPONT MORGAN 

■Qpon no one but Mr. Morgan could the re- 
sponsibilit}" for the successful financing of 
the proposition have been placed. That in- 
volved a decision as to the manner in which 
the stock of the subsidiary companies was 
to be paid for by the parent company, — a 
vastly complicated question. How much 
preferred stock and how much common 
should be issued by the parent company to 
pay for the capital stock of the subsidiary 
companies? That w^as a problem which 
none but a genius in finance could work 
out; for there were many men of many 
minds to be considered. 

Then, too, there was the manner in 
which the bonded indebtedness of the sub- 
sidiary corporations was to be cared for. 

Beyond all this was the supreme question 
involving the ability of the public to absorb 
such part of the securities of the United 
States Steel Corporation as were not issued 
in payment for the stock of the subsidiary 
companies. 

The proposition, when fully worked out, 
represented the creation of new capital ag- 
gregating about one billion four hundred 
million dollars. Mr. Morgan's mind 




CHARLES M. SCHWAB HENRY C. FRICK 






mi 




ELBERT H. GARY 



J. A. FARRELL 



UNITED STATES STEEL 211 

grasped and answered this proposition with 
a quickness that amazed those who were 
then brought in touch with him. Here his 
constructive power was revealed more 
clearly than at any other time in his career ; 
it must be remembered that an industrial 
proposition was almost new to him. He 
had no doubt that if the stockholders of 
the subsidiary companies agreed upon the 
terms of the transfer of their stock to the 
new corporation, the public would not hesi- 
tate about accepting such share of this stock 
as was offered. In this he was right. The 
billion dollar corporation was the industrial 
wonder of the world, when it was an- 
nounced; but the still greater wonder was 
the celerity with which the American people 
absorbed the stock offered to them. 

Here was a proposition involving, in the 
aggregate, the organisation of a company 
with a total stock capital of eight hundred 
and ninety million dollars (round num- 
bers), and with a bonded indebtedness of 
three hmidred millions (round numbers). 
The greater part of the stock of the new 
corporation was given in exchange for the 
stock of the constituent companies. These 



212 J. PIERPONT MORGAN 

companies were the Carnegie Company, the 
Federal Steel, the National Tube, the Nat- 
ional Steel, the American Steel, the Ameri- 
can Steel Hoop, the American Tin Plate, 
the American Steel & Wire, the American 
Bridge, the Shelby Steel Tube, companies, 
and the Lake Superior Mines. 

In perfecting the organisation, Mr. Mor- 
gan regarded it as essential that practically 
the entire issue of capital stock of what be- 
came subsequently the constituent compa- 
nies of the United States Steel Corporation 
should be acquired by the Steel Corporation. 
In exchange therefor the stockholders of 
these subsidiary companies were to receive 
preferred and common stock of the Steel 
Corporation. 

The underwriting syndicate had acquired, 
first of all, nearly one hundred millions of 
the capital stock of the Carnegie Company, 
and a little over one hundred and fifty mil- 
lions of its five per cent, bonds. It paid for 
these securities, fii'st, with three hundred 
and three millions (round numbers) of the 
first mortgage bonds of the United States 
Steel Corporation, with $1,200,000 ad- 
ditional in cash; and it subsequently se- 



UNITED STATES STEEL 213 

cured sixty-four millions of the Carnegie 
stock (practically all there was), and paid 
for it with 982,000 shares of the preferred 
stock and 902,000 shares of common stock. 

When the stock of the United States 
Steel Corporation was offered to the public, 
the second of the tests of confidence in Mor- 
gan's judgment and integrity was made. 
There were before this offering grave 
doubts whether the public would buy these 
securities, notwithstanding the fact that the 
common stock was issued on a four per cent, 
dividend basis, and the preferred stock on 
a seven per cent, basis. But it immediately 
became apparent that these securities would 
be speedily bought up, notwithstanding the 
quantity of them. They were absorbed 
within a few months. The public took this 
stock at a price a little in excess of the 
figure at which it was underwritten by the 
syndicate organised by Mr. Morgan. 

The underwriting of the colossal United 
States Steel Corporation proposition, and 
the swift and vast success of it will al- 
ways be regarded as the greatest of Mor- 
gan's achievements. It was not only great 
in the actual size of the undertaking, and 



214 J. PIERPONT MORGAN 

in the experimental nature of it, but it was 
something special, in the sense that it re- 
vealed the confidence which Morgan had 
established throughout the business world 
of the United States and of Great Britain. 
Ex-Mayor Grace of New York once told 
of his own experience with the affair, which 
shows the way it was done. He received 
by mail one day a very brief communica- 
tion, signed by J. P. Morgan & Co., stating 
that he had been allotted participation in 
the underwriting of the United States Steel 
Corporation to the extent of one hundred 
thousand dollars. At no time before he re- 
ceived this communication had any intima- 
tion come to him that Mr. Morgan had his 
name in miad when organising the under- 
writing of the Steel Corporation stock. In 
fact, he had never spoken to Mr. Morgan 
about the proposed organisation. 

To subscribe one hundred thousand dol- 
lars to an underwriting syndicate meant 
that he must risk as large a sum as that en- 
tirely upon his confidence in J. P. Morgan. 
He could take or leave the invitation, as he 
chose. He might be compelled to pay the 
one hundred thousand dollars in, and to re- 



UNITED STATES STEEL 215 

ceive and to carry the amount of stock for 
which this one hundred thousand dollars 
paid. It was an investment of the nature 
of which he knew nothing. He had heard 
that the organisation involved the creation 
of the greatest corporation of modern 
times; so great that it was already being 
spoken of as ''a billion dollar corporation." 

Of that one hundred thousand dollars, 
the former Mayor would be called upon 
innnediately for twelve and one-half per 
cent., or eight thousand dollars. He in- 
ferred that this first payment was for the 
purpose of providing a working capital for 
immediate use, — as indeed it was. 

Solely as a matter of faith in Mr. Mor- 
gan the former Mayor accepted the invita- 
tion to subscribe, and he was never called 
upon for one cent of his subscription ex- 
cept the eight thousand dollars. He 
learned that the other subscribers had also 
paid in cash twelve and one-half per cent, of 
their subscriptions, and the total of these 
payments furnished a cash working capital. 

In due time he received his proportionate 
part of the profits of the underwriting 
syndicate, which amounted to one hundred 



216 J. PIERPONT MORGAN 

per cent, on the eiglit thousand dollars he 
had paid in. Based upon the entire sub- 
scription of one hundred thousand dollars, 
the profits were about twelve and one-half 
per cent. And he said: "I never made 
money as easy as that." 

As payment for putting the deal through 
the Morgan syndicate received exactly 649,- 
897 shares of common stock of the corpora- 
tion and an equal number of preferred 
shares. The syndicate's profit, net, w^as 
about two hundred per cent, on the amount 
of cash actually paid in. In order to make 
this profit the syndicate had guaranteed the 
sale of securities amounting to one billion 
four hundred million dollars; at any time 
events might have conspired to swamp them. 
An illustration of the chances they took is 
furnished by the experience of Henry C. 
Frick, who undertook the public flotation of 
the Carnegie Company some years ago. He 
and his associates put up as a bonus one mil- 
lion.dollars in cash. Before they succeeded 
in putting the scheme through there was a 
disturbance in the money market and the 
enterprise fell through. As a result the 
million dollars was forfeited to Carnegie, 



UNITED STATES STEEL 217 

who had given the option. Had the panic 
of Blue Thursday, which came in May, 
1901, through the fight for control of the 
Northern Pacific, happened in March or 
April, the steel syndicate would surely have 
met with disaster. 

After the United States Steel Corpora- 
tion was organised, astonishment was ex- 
pressed by financiers and others that John 
W. Gates had not been elected a member 
of the board of directors. It was assumed 
that because of Mr. Gates's intimate rela- 
tion to the proposition and his earlier asso- 
ciation with Mr. Morgan in the organisa- 
tion of the so-called wire trust, he should 
have been one of the first to be chosen a 
director of the new corporation. The en- 
tire wire industry of the country had been 
brought into one corporation, very largely 
through the effort of Gates. Not until two 
years later was the real reason discovered 
why Mr. Gates was not chosen. Morgan 
was called as a witness before the Interstate 
Commerce Commission, and, in the course 
of the examination, was asked some ques- 
tions relating to John W. Gates. In reply, 
Mr. Morgan said that he considered Mr. 



218 J. PIERPONT MORGAN 

Gates a dangerous element in the railroad 
world. This confirmed the story that Mr. 
Morgan had expressed himself personally to 
Mr. Gates in terms far more vigorous than 
those in which he answered the questions of 
the Interstate Commerce Commission. 

After the organisation of the United 
States Steel Corporation Mr. Morgan's 
prestige was vastly increased. He was the 
guest of Emperor William in July, 1902, 
and the formal etiquette, as well as social 
distinction, which characterised the Emper- 
or's intercourse with Mr. Morgan equalled in 
impressiveness his meetings with his fellow- 
monarchs, although, of course, the demon- 
stration was of a different kind. The 
Emperor visited Mr. Morgan on his j'-acht, 
the Corsair. In fact, the Emperor and Mr. 
Morgan were in friendly association for 
several days. The Emperor sent the royal 
car to Kiel, where Mr. Morgan's yacht was 
anchored, for the purpose of bringing Mr. 
Morgan to Berlin. So, also. King Edward 
met Mr. Morgan on the Continent and after- 
ward received him as a personal guest at 
London, making it apparent to all who saw 
the two men upon this occasion that the 



UNITED STATES STEEL 219 

King regarded Mr. Morgan as the financial 
monarch of the world. Mr. Morgan had 
been told that the Emperor had often ex- 
pressed the wish to meet the man whom he 
described as having accomxDlished the great- 
est financial and industrial achievement of 
modern times. What he thought of Mor- 
gan, after meeting him, was apparent from 
his manner. What Mr. Morgan thought of 
him was expressed in his characteristic way. 
He said, ''I have seen the Kaiser, and I like 
him." 

The task of executive management of the 
Steel Corporation has now had ten years 
in which to work itself out ; at the very be- 
ginning it was placed on a basis which 
would keep up the rivalry — in efficiency — 
between the old concerns. The proprietor 
corporation does not operate the mines or 
the factories or run the vessels and rail- 
roads. Each of the constituent companies 
is an operating company with its own presi- 
dent, officers and board of directors. The 
Steel Corporation simply maintains a close 
watch upon all and compares results. It 
dictates the labor policy, and that policy has 
been a little masterpiece of industrial en- 



220 J. PIERPONT MORGAN 

gineering — from the point of view of the 
masters. Almost immediately, that is to say 
within two or three months of its formation, 
the Steel Trust encountered one of the big- 
gest strikes in the history of the steel busi- 
ness. The strike began on the first day of 
July, 1901, and lasted until September 15, 
when work was resumed. The difficulty 
was not a question of wages, hours of labour, 
or rules or conditions of work, but a con- 
test for recognition of the union, which de- 
mand was refused by Mr. Morgan. Mr. 
Morgan said "no compromise," and com- 
promise there was none. 

To-day the employers are organised, the 
workmen are not; the Amalgamated has 
not even a footing in a single steel mill 
handling heavy material. In its relations 
with labour the Steel Corporation is a pa- 
ternal institution; it hires the men indi- 
vidually. 

Social workers say this arrangement is 
wrong in principle and will surely weaken 
the steel workers as a class. It is a fact, 
however, that, in the days of its power, the 
Amalgamated went further than simply to 
demand a voice in determining labour con- 



UNITED STATES STEEL 221 

ditions— it demanded a share in administra- 
tive control that was inconsistent with nec- 
essary business methods. So the steel com- 
panies turned and crushed Unionism. But, 
like the Union, which in the days of its 
strength demanded all the benefits of an in- 
crease in tonnage due to a new invention, a 
more effective machine, and would not ac- 
cept a reduction in the rate of pay, the steel 
company is now demanding all of the bene- 
fits of increased output, whether due to in- 
ventions or to physical effort, and will not 
permit any proportionate advance in work- 
men's earnings. To bind their employees to 
the institution they have introduced profit- 
sharing and the sale of stock to the men. 
In its way, this is good for the men and 
good for the companies; no stockholder 
wants to try to organise a union when the 
terms of his agreement with the company 
state that only those who show a proper in- 
terest in its welfare and progress will re- 
ceive a bonus. Never, if human ingenuity 
can prevent it, will the management of the 
Steel Corporation go back to the difficult 
days before Homestead, when the men ran 
the mills. 



222 J. PIERPONT MORGAN 

Great growth in the earning power of 
the corporation has been effected by a per- 
sistent programme of improvement. Since 
1901 no less than $232,000,000 has been 
taken from earnings and put back into the 
plants and properties of the company. The 
original water in the stock representing the 
enormous price Carnegie and others de- 
manded and received for their companies 
has been replaced by valuable acres of min- 
eral lands and other j)roperties. ^Finally, 
prices have been stabilised, a factor of the 
utmost importance in preventing violent 
fluctuations of the stock in the market. 
IWhile the Steel Corporation includes less 
than sixty per cent, of the industry in 
America, it will eventually control abso- 
lutely all the raw material in the country. 
For the present it maintains a friendly 
community of interest with the independ- 
ent companies, and a kind of silent ac- 
quiescence has generally prevented price 
cutting. Every once in so often there takes 
place a ^' Steel dinner," at which the heads 
of the various companies sit down to meat 
with the Steel Corporation; at which it is 
breathed into the air through the innocuous 



UNITED STATES STEEL 223 

medium of after-dimaer speeches that "con- 
ditions are good in the steel industry," and 
that it is well to let matters run on as they 
are. 

Thus it is that an investor's Golden Age 
has come to the one-time turbulent steel 
industry; vicious and stabbing competition 
is replaced by a rivalry in producing results. 
Twentieth century efficiency has been in- 
jected into all its veins ; men and machinery 
have been welded into a monstrous super- 
machine ; it has been the task of a giant, of 
the foremost builder in an age of builders 
— and of jerry-builders — and stands to-day 
as his masterpiece. 



CHAPTER XI 

THE SPIEIT OF COMBINATION 

IN the year 1865, when J. Pierpont Mor- 
gan of New York and London was en- 
gaged exclusively in the sale and purchase of 
foreign exchange, when railroads and the 
stock market knew him not, and the modern 
industrial corporation was unborn, the fol- 
lowing prophetic statement appeared in one 
of the staid and thoughtful London jour- 
nals: 

"We are at the outset of a new era in 
social progi-ess and one which is probably 
the highest to which material civilisation 
can attain. It is the era of cooperation. 
Hitherto competition has been regarded as 
the most efficient agent of social progress. 
But the principle of competition is one of 
rivalry and struggle. It is a system of beg- 
gar-my neighbour, most useful in the earlier 
stages of civilisation, but one most un- 
worthy of civilisation at its maturity. It 

224 



SPIRIT OF COMBINATION 225 

is costly, for it requires many companies 
and establishments to do the work which 
would be more economically performed by 
one." 

What is here called "cooperation," but 
which really signifies the use of the com- 
bination principle by capitalists, existed in 
England as theory long before it blossomed 
out in America in the tangible form of the 
trusts. With us the theory of combination 
has followed a long distance behind the prac- 
tice, and by the same token so have the eth- 
ical and political ideas, codes, and practices 
that should apply to this industrial trans- 
formation failed to keep the i3ace. Combi- 
nation has given us the staggering phenome- 
non of big business. Of this change from 
competition to combination the chief human 
agent has been the djmamic and instinctive 
personality of J. P. Morgan. 

I say chief human agent, because it is 
very apparent that during the past twenty 
or thirty years some underlying force, the 
brute force of nature itself, has been stead- 
ily operating in the direction of the concen- 
tration of capital and the unifying of scat- 
tered industrial enterprises. But blended 



226 J. PIERPONT MORGAN 

with this powerful and irresistible process 
of change have been individuals powerful 
and irresistible ; their names readily come to 
mind — Carnegie, Prick, Rockefeller, Hill, 
Huntington, Harriman, the Goulds, Van- 
derbilts — many others besides J. P. Morgan. 
But there is a vital difference between Mr. 
Morgan and these others, and it is this : their 
identification with the combination principle 
was casual and the result of circumstances ; 
they have as often been competitors as com- 
biners, and as willingly one as the other ; but 
Mr. Morgan, in season and out of season, 
stood for combination as a principle and 
made it the basis of his business life. 

As soon as he became an influential factor 
in the financial world he exerted a constant 
pressure in this direction, and as a result of 
his solid and simple stand, fate threw larger 
opportunities in his hands than in those of 
any other man of his generation. In the 
period from 1890 to 1900 the railway sys- 
tems of the country, gigantic, sprawling, 
and weakened to the point of helpless im- 
poverishment by competitive battles, were 
forced, with very few exceptions, to un- 



SPIRIT OF COMBINATION 227 

dergo complete reorganisation. Mr. Mor- 
gan proved himself the most successful 
reorganiser, and he used the power and 
prestige thus gained to eliminate competi- 
tion from the railroad business. The next 
ten years brought forth numbers of indus- 
trial combinations; Mr. Morgan bested 
everyone at this sort of work, and every 
corporation he formed or influenced did 
away with real competition. 

We are now reaching in this narrative of 
Mr. Morgan's life the stage of results and 
conclusions; it is now clear what he stands 
for, this towering idol of an age devoted 
passionately to facts, money, commerce, effi- 
ciency — ^to results immediate and sure. Not 
mere fortune-making operations have placed 
him where he is; in all the larger under- 
takings of his life there has been exerted 
a kind of financial statesmanship tending to 
create a more or less permanent and assured 
money return for all investors in those 
enterprises. As to his method it is clear 
that, finding men hard to manage but easy 
to command, he always and everywhere 
took command and, by the force of his de- 



228 J. PIERPONT MORGAN 

cided character and the propulsion of his 
enormous will, made things go in the new 
Morgan grooves. 

Some account has alreadj^ been given in 
this book of his railroad reorganisations, but 
it yet remains to describe the one which 
proved the most difficult, and also to bring- 
together the widely separated features of his 
railroad control into a definite picture of 
one-man power. We shall, moreover, soon 
consider those enterprises and events that 
immediately followed the flotation of the 
Steel Corporation, namely, the ill-fated 
^'Steamship Trust," the Harvester Trust, 
the collapse of steel common, and the ship- 
building fiasco, when the public, com^Dletely 
reversing its hero-worshipping attitude of 
1901, focussed upon J. P. Morgan all the 
bitterness of its disappointment. 

It was about midway of his career as a 
master of railroads, the year 1893, that 
Mr. Morgan undertook a railroad reor- 
ganisation which will always stand out as 
the prime example of his peculiar ability for 
mastering a bewildering and apparently 
hopeless situation. There was then a loose 
organisation of railroads in the South, cov- 



SPIRIT OF COMBINATION 229 

ering about 9,000 miles, divided among 
twenty-two companies, and operating under 
tlie management of the Richmond Termi- 
nal Co. The combination was so ill put to- 
gether, with such a complicated tangle of 
securities and underlying obligations that 
lapped and overlapped one another, that it 
had acquired the reputation of a financial 
nuisance of the first order. Factional 
quarrels arising from imsettled questions 
betw^een the individual companies, each jeal- 
ous of its rights, and each claiming a little 
more than its rights, were constantly break- 
ing out; no power had arisen which could 
still these discordant elements. The Rich- 
mond Terminal was a shocking exhibition 
of confusion and disorder, swayed by bel- 
ligerents who acted as if unconscious of 
their bankruptcy, and sxolit in two by a dis- 
pute impossible of decision if one had to be 
fair to all the claims and exigencies in pos- 
session. 

The bondholders named a committee to 
struggle with the problem, and the commit- 
tee went down with the wreckage of their 
plans — and stocks went down, too. An- 
other committee was named, this time with 



230 J. PIERPONT MORGAN 

Frederick P. Olcott, President of the Cen- 
tral Trust Company of New York, as chair- 
raan, and the Olcott committee shuffled the 
liabilities and the fixed charges and the 
claims and proportions for several months, 
putting out figures for proposed new capi- 
talisations, and seeking strenuously to gain 
the concurrence of an immense mass of se- 
curities divided into over a hundred differ- 
ent classes — all in vain. In the summer of 
1892 the security holders' committee went 
to Mr. Morgan. He said he wouldn't con- 
sider undertaking the task unless it was 
committed to his hands unhampered by bar- 
gains made for the benefit of particular in- 
terests. This condition being agreed to, his 
firm made an examination of the Richmond 
Terminal properties and then announced 
that it would take up the work but would 
''demand, in view of the unparalleled diffi- 
culties and complications, protection against 
any single interest which might desire to 
thwart the carrying out of the reorganisa- 
tion, and insist that a majority of each class 
of Terminal securities he deposited with 
them at the beginning'^ — and further that 
all litigation should be under control of 



SPIRIT OF COMBINATION 231 

Drexel, Morgan & Co., and that the new re- 
ceivers should be named by the Morgan 
firm. 

At such conditions the security holders, 
for all their bad plight, professed simple 
amazement; they felt that they were being 
asked to go into a blind pool and to pledge 
themselves in advance to make any sacrifice 
that might be demanded of them. The 
thing outraged their self-respect, and they 
refused the Morgan offer, tried it them- 
selves for another six months, and then came 
back to Mr. Morgan and begged him to take 
the matter up at once upon his own terms. 
Within three months Morgan and Company 
made public a very voluminous plan, which 
resulted in the creation of the Southern 
Railway Company. It provided that the 
new company should be capitalised at $375,- 
000,000 and that the securities of railroads 
not earning interest on their bonds should 
be exchanged for securities of the new cor- 
poration in certain proportions. Twenty- 
two railroads with their bonds, preferred 
stock, common stock and securities of the 
Terminal company were each to receive a 
proportion of the new five per cent, bonds 



232 J. PIERPONT MORGAN 

and new preferred and common stock. In 
these proportions and adjustments lurked 
endless possibilities of friction between the 
security holders and the plans of the reor- 
ganisers — innumerable excuses for rebellion 
or the revival of old feuds. But Mr. Mor- 
gan, as we have seen, had placed himself in 
a position to enforce his plans. 

There is no better instance of his intense 
practicality than this, that however flatter- 
ing were the appeals from the distressed 
shareholders, however tempting the oppor- 
tunity of stepping in from the outside to 
take charge of the affairs of a huge system 
of railroads, Mr. Morgan refused to move 
an inch except upon conditions of his own 
w^hich he foresaw would make the way clear. 
It was not long before he had financiered 
away the existing discrepancy between earn- 
ings and outgo — a three million dollar deficit 
it was, in point of fact — and had turned a 
hopeless ruin into the system now known as 
the Southern Railway. The Richmond Ter- 
minal, with its annual tale of horrors in the 
balance sheet, vanished, and the Southern 
Railway took its place. The Southern was 



SPIRIT OF COMBINATION 233 

thus added to the list of roads — the Read- 
ing, Northern Pacific, Erie, Lehigh Valley, 
and a dozen others — which Mr. Morgan fin- 
anciered out of a tight place or worse, and 
in which he afterward retained control. 

All credit for this series of railroad re- 
habilitations is by no means his alone; to 
one of his partners — the late Charles H. 
Coster — was always assigned the task of 
solving the intricate and interwoven rela- 
tions of railroad obligations, bonds, under- 
lying bonds, collateral trust mortgages, and 
every other artificial form of securing a 
loan — and determining the amount fairly 
represented by each. Coster was a kind of 
rare genius, a sort of financial chemist, and 
possessed a gift of analysis in this new and 
difficult field; it often happened, when 
everyone else was baffled, that he alone was 
able to lay before his chief solutions clear 
and sound, which made it possible for Mr. 
Morgan to go ahead with his plans for a new 
structure. These operations were all of a 
new kind, following naturally upon the con- 
solidation of the numerous railway short 
lines into trunk systems; for just as the 



234 J. PIERPONT MORGAN 

roads had to be physically unified to give 
effective service, so the capital on which 
they were based had first to be consolidated 
in a more or less loose way, and afterwards, 
under pressure of conditions, had to be re- 
issued on a sounder, more lastingly work- 
able plan. 

J. P. Morgan's sure perception of the 
right thing to do, the success which was in- 
evitably coupled with his appearance in an 
undertaking, added year by year to his 
unique reputation as a restorer of moribund 
properties and rescuer of securities all but 
lost. With him it very soon became a mat- 
ter of retaining control, or a voice at least, 
in the affairs of the railroads he reorgan- 
ised, to prevent further mishaps or the use 
of bad judgment; and then there came the 
necessity of extending that control to still 
other lines which might become competitors 
and start the old difficulties afresh. Thus 
it came about that before the world in gen- 
eral realised what was going on Mr. Morgan 
had become a power in the transportation 
business to an extent which, expressed in 
figures of mileage and capital, was to an old- 
fashioned mind simply appalling. 



SPIRIT OF COMBINATION 235 

Steam Eailroads Controlled by J. P. Morgan, 1902 

Outstanding 
Mileage capitalization 

•Northern Securities Co $400,000,000 

Great Northern Railway Sys- 
tem 5,585 96,683,454 

Northern Pacific Railway 
System 5,664 177,925,789 

Chicago, Burlington & Quincy 
Railway 8,479 362,357,300 

Southern Railway, with de- 
pendent properties 8,929 355,484,309 

Central of Georgia 2,271 53,646,000 

Louisville & Nashville 6,174 165,784,660 

Reading, with Jersey Cen- 
tral, and Coal & Iron Co. . 2,131 297,067,290 

Erie 2,554 362,770,756 

Hocking Valley 941 70,189,548 

Lehigh Valley 1,399 94,012,100 

Atchison, Topeka & Santa Fe 

(with Harriman) 7,919 445,235,240 

St. Louis & San Francisco 

(with others) 3,507 121,593,125 

55,555 $3,002,949,571 

*The "Northern Securities Co.," which held the stock of 
the Great Northern, Northern Pacific and the C, B. & Q., 
was dissolved by the Supreme Court in 1904. 

Mr. Morgan at this time was also very influential in sev- 
eral other large systems, including the Vanderbilt and Penn- 
sylvania properties, the Atlantic Coast Line and Seaboard 
Air Line. Indeed, there was no railroad system of major im- 
portance in which he was not, to a greater or less extent, a 
factor. 



236 J. PIEEPONT MORGAN 

The method of control varied; sometimes 
lie retained a percentage of the stock ; some- 
times he put the railroad into a voting trust, 
which means that the stockholders were 
induced to transfer to a board of trustees 
the right to vote their stock ; or he was sim- 
ply a director; or, simpler still, he merely 
exercised his influence upon the powers in 
tangible control. To this kind of master- 
ship there is, in one way of looking at it, 
a beginning, perhaps, but no end — no de- 
finable limits. It appeals to the imagina- 
tion, and may easily set the imagination 
wandering far ; for it presents you with the 
idea of an immense, potent, and invisible 
hand thrust into the blind confusedness of 
practical affairs, turning everything in a 
new direction, and setting things going on 
a new, profitable basis. The new basis is 
yet primitive and little understood. The 
business of the country was built up on the 
principle of competition, but the time came 
when that principle proved impracticable 
as applied to great masses of capital in- 
vested in machinery, rolling stock or road- 
beds. Thus the idea of combination was a 



SPIRIT OF COMBINATION 237 

life-saver for American industry. That it 
was from this point of view a public benefit 
is undeniable, but that it has proved a public 
benefit from every point of view or in all 
the ramifications and details no one can 
think. The practice of combination which 
has been imposed upon the public by powers 
like Mr. Morgan was also clearly imposed 
upon them by the sternest necessity. 

When J. P. Morgan was a boy at Hart- 
ford, Connecticut, a railroad was con- 
structed from Springfield to New Haven, 
passing through Hartford, chiefly for the 
purpose of making connection with the 
steamboat lines running between New Haven 
and New York. His father was greatly 
interested in this railway, and helped to 
finance it — that is the tradition. At least 
ten years later the construction of the New 
York & New Haven Railroad Company was 
begun ; and five years earlier, a railway line 
had been built from Worcester, Mass., to 
Norwich, Conn., for the purpose of facili- 
tating passenger and freight traffic between 
Boston and New York. Between 1833 and 
1872 was the era of great railway construe- 



238 J. PIERPONT MORGAN 

tion throughout New England. The first 
important consolidation took place in 1872, 
when the New York & New Haven and the 
New Haven, Hartford & Springfield rail- 
way companies were combined. Mr. Mor- 
gan took no active part in this consolidation, 
but he told William C. Bishop, whose father 
built the New York & New Haven railroad, 
and who himself worked out the plan of 
consolidation of the two railroads and who 
became president of the consolidated rail- 
road — that he believed in the plan thor- 
oughly. 

Bishop became a member of the Con- 
necticut Legislature in 1872, so that he 
might be in better position to urge the pass- 
ing of a charter which would permit the 
consolidation of these two railroads. At 
that time the Morgan name, though little 
known elsewhere in the country, had weight 
in Hartford, and Bishop said in an inter- 
view: "Mr. Morgan believes that the New 
Haven Railway System, which has termi- 
nals in New York City, should concentrate 
its efforts upon securing an independent en- 
trance into Boston. Boston and New York 



SPIRIT OF COMBINATION 239 

should be connected by a single railway line 
under one direction." 

At that time, the New Haven Railroad 
was compelled to enter Boston, or to re- 
ceive passengers at Springfield from Bos- 
ton, by means of a traffic agreement with the 
Boston & Albany Railway system. Soon 
after Mr. Morgan became a director of the 
New Haven, its management began to seek 
an independent entrance to Boston, through 
the purchase or control of a railroad stretch- 
ing from Boston southwesterly. 

At this juncture Archibald McLeod be- 
gan his astonishing campaign for the ex- 
tension of the Reading, of which he was 
President, into and across New England, 
intending to secure an independent entrance 
for the Reading at Boston. McLeod pro- 
posed to carry his road by means of the rail- 
road bridge at Poughkeepsie, over the 
Hudson, and then, through the control of 
the old New York & New England railway 
propert}^, to gain an independent entrance 
to Boston. He descended upon the Old 
Colony Railroad system, which covered all 
of Southeastern Massachusetts, and reached 



240 J. PIEEPONT MORGAN 

as far as New London, Conn. This strug- 
gle for the control of the Old Colony has 
become traditional in railway annals. In 
all probability, President McLeod would 
have won the fight if he had not had for an 
enemy J. P. Morgan, who had been work- 
ing on that idea along different lines for 
twenty years. 

Mr. Morgan notified men of capital in 
Philadelphia that they must not expect to 
maintain friendship with him if they con- 
tinued to help McLeod finance his railroad 
project in New England. That was a hmt 
sufficient. McLeod 's money supply failed 
from the moment that hint was received. 
His New England railway plans collapsed; 
and, in a little while, under Mr. Morgan's 
leadership, the Old Colony sj^stem passed 
into the possession of the New Haven. 
That gave the New York & New Haven a 
through independent railway line operating 
between New York and Boston ; and the sec- 
ond very important step toward the com- 
bination of the railway interests in New 
England into one dominating system was 
then taken. 

The New Haven then purchased or leased 



SPIRIT OF COMBINATION 241 

every railway line in Connecticut, excepting 
one, the Central Vermont; every railway 
line in Rhode Island; everyone in Massa- 
chusetts south of Boston and the Boston & 
Albany railroad; and, in addition, the 
steamboat lines connecting Boston and New 
York were financed into the possession of 
the New Haven system. Within a year, the 
great Boston & Maine Railway system 
passed into the control of the New Haven. 
Furthermore, largely through the efforts of 
Mr. Morgan, the Boston & Albany railway, 
which had been leased by the New York 
Central, entered into cooperative arrange- 
ments with the New Haven, and within a 
few months, the Rutland Railway system, 
which was owned by the New York Central, 
passed, with the consent of the New York 
Central, into the New Haven Railroad fam- 
ily, although the New York Central still 
retains half ownership of the Rutland 
Road. 

Charles S. Mellen, President of the New 
York, New Haven & Hartford and of the 
Boston & Maine, has made official and au- 
thoritative declaration of the purpose of the 
New Haven Railroad management, when 



242 J. PIERPONT MORGAN 

it began the merger process which has 
brought practically all of New England 
under the domination of the New Haven 
Railroad system. Said Mr. Mellen: 

"Wisely or otherwise, the railroads of 
New England have come together, and 
should work hereafter as a unit for the 
fullest development of all that appertains 
to the welfare of New England." 

All this combination and cooperation has 
made it possible to develop to their fullest 
capacity, the superb commercial opportuni- 
ties which Boston has. Within a short 
time, the New Haven system will have en- 
tered into such arrangements with the Cana- 
dian Pacific, utilising the Rutland Railroad 
chiefly for that purpose, as will make Bos- 
ton the all-the-year Atlantic terminal of the 
Canadian Pacific. This possibility would 
never have appeared on the horizon so long 
as New England was covered by a large 
number of small independent railroads. 

If there were no other way of identifying 
J. P. Morgan with the new development of 
the transportation systems, land and water, 
of New England, the use of the word ''unit" 
by President Mellen would be sufficient. It 



SPIRIT OF COMBINATION 243 

is a striking demonstration of what Mr. Mor- 
gan believes the economic principle of the 
present era, namely : the elimination of small 
and independent units, and the perfecting 
of very large units into which these smaller 
ones can be absorbed. Many of the railway 
combinations have been along the parallels 
of latitude, like that represented by the New 
York Central and the Union Pacific ; or else 
along parallels of longtitude, like the vari- 
ous railway systems of the South, and the 
Illinois Central Railway system. But the 
New England combination covers all points 
of the compass. Standing at a centre like 
Springfield or Worcester, you could practi- 
cally box the railway compass of New Eng- 
land, and find that within that compass was 
included almost exclusively the New Haven 
Railway system. 

Not bearing on this particular point, but 
interesting on its own account, is what he 
said when he began his service as a director 
of that system. There was a meeting of 
the board at the old Grand Central Station. 
Mr. Morgan entered the room, and took his 
place at the foot of the table. He greeted 
pleasantly and informally all the members 



244 J. PIERPONT MORGAN 

of the board; but he said nothing. He lis- 
tened intently to the business as it came be- 
fore the board, remaining taciturn. When 
this business was ended, the President, turn- 
ing to Mr. Morgan, said : 

^'Mr. Morgan, I am sure that the board 
would be very glad to hear from you, and 
would be especially pleased if you have any 
suggestions to make." 

Thus invited, Mr. Morgan arose, and 
said: 

''There is just one thing I would like 
to say. I have been told that you are very 
slow about paying your just bills. I hear 
that some of your creditors have been held 
up, or staved off, sometimes as long as six 
months. Now I thmk this railroad ought 
to pay its just bills as soon as they are 
due; and, if you haven't the ready money 
in hand to pay them, I will advance the 
money." 

Having said this, he sat down, and the 
meeting adjourned. Mr. Morgan has al- 
ways insisted that in any institution he was 
connected with, just bills should be paid at 
the time agreed upon; and, if it should be 
inconvenient to do that out of the company's 



SPIRIT OF COMBINATION 245 

treasury, then the officers of the company 
should see to it that money is obtained. 

Mr. Morgan's sense of personal respon- 
sibility for institutions that had come to be 
identified with his name or the name of his 
banking house has always been very strong, 
and points to a trait of character which in 
him is perhaps the most marked of all — his 
mimeasured loyalty to his word, a prin- 
ciple which is fully as active within him 
when the obligation is scarcely more than 
a reflection of the glamour of the Morgan 
name as when it is set down in the hard 
core of an agreement. He explained his 
own feeling about these matters in one of 
the longest speeches of his life, when he was 
questioned on the witness stand in the 
course of an inquiry into the Northern Pa- 
cific corner in Wall Street in May, 1901. 

The circumstances may be recalled: E. 
H. Harriman, having built up in a few years 
his tremendous railroad monopoly in the 
Southwest, went after James J. Hill and 
tried to induce him to fuse the interests of 
the Great Northern and the Northern Pa- 
cific with the Harriman lines. When Hill 
refused, Harriman, with one of his char- 



246 J. PIERPONT MOEGAN 

acteristic and startling decisions, immedi- 
ately set out to buy control of the Northern 
Pacific. Mr. Morgan had just completed 
the organisation of the Steel Corporation 
and had sailed away to Europe ; he and Hill 
and their friends held between them about 
forty millions of Northern Pacific common 
stock. As Harriman bought the stock went 
up, higher and higher, and the Morgan 
party let go a considerable block of theirs 
before the slightest suspicion came to them 
concerning the cause of this mysterious rise 
in value. After the event it is hard to un- 
derstand how Morgan and Company were 
kept so long in the dark, for to lose the con- 
trol of the road to Harriman was the last 
thing they were willing to do. 

The moment they realised their position 
their sales of stock stopped short and the la- 
conic cable come from Mr. Morgan at Aix- 
les-Bains — ''Buy 150,000 shares Northern 
Pacific," — an order which exploded a panic. 
This is what Mr. Morgan said about it: 

''When I heard of it, I felt in this po- 
sition: We had organised the Northern 
Pacific, we had placed all the securities of 
the Northern Pacific, and I knew, as I had 



SPIRIT OF COMBINATION 247 

always supposed, that there were people, 
friends of ours and other people, who prac- 
tically held enough Northern Pacific — we 
had always supposed we had with us people 
upon whom we could depend to protect our 
moral control of the property. And conse- 
quently when that news came to me, I hadn't 
any doubt about the fact of the matter. 
And at the same time the news came so 
strong — whoever had acquired it — I felt 
something must have happened. Somebody 
must have sold. I knew where certain 
stocks were and I figured it up. 

''I feel bound in honour when I reor- 
ganise a property and am morally respon- 
sible for its management, to protect it, — and 
I generally do protect it. So I made up 
my mind that it would be desirable to 
buy 150,000 shares of stock, and with that 
I knew we had a majority of the common 
stock; and I knew that actually gave us 
control, and they couldn't take the minority 
and have it sacrificed to Union Pacific in- 
terests. 

''Mr. John S. Kennedy has been a friend 
of mine for forty years. He and I were 
in Aix together. He came down to see 



248 J. PIEEPONT MORGAN 

what in the mischief all this meant. I said 
I didn't know, and he said, 'Whatever you 
want done I want done with my Northern 
Pacific' And that is the way people 
treated me in the Northern Pacific. What- 
ever I was willing to do they wanted, and 
they wanted to put the stock just where I 
said it would be safe. That was what they 
wanted. Well, I appreciated that ; I cannot 
help being touched by a thing of that kind." 
On the receipt of J. P. Morgan's cable 
his firm engaged "Jim" Keene, the one 
time free-lance operator of the San Fran- 
cisco stock market, and now the most fa- 
mous manipulator in New York, to get the 
shares for them in the market. The com- 
petitive buying soon sent the price of 
Northern Pacific common out of reach in a 
market where all were buyers and none 
sellers; dozens of brokerage houses were 
caught by the peculiar pyrotechnics of that 
stock, which no wisdom could have foreseen, 
and owing thousands of shares which they 
had sold but could not buy to deliver — the 
price went to a thousand dollars a share — 
they stood on the verge of bankruptcy. 
May 9th saw a curious and terrible state of 



SPIRIT OF COMBINATION 249 

affairs on the Stock Exchange ; the extraor- 
dinary need for cash, for four or five days 
past, had steadily forced the sale of all kinds 
of stock except "N. P.," and now the selling 
movement suddenly became a deluge which 
swept all values madly downward. So many 
shares were sold that it was impossible to 
keep track of them all, while above this 
ghastly confusion and wreckage, balloon 
high, hung the perfidious cause of it all — 
the stock which no one could buy. 

Then in some haste the antagonists came 
to an agreement ; Morgan & Co. met Harri- 
man's financial backers, the firm of Kuhn, 
Loeb & Co., and agreed to end the tragic sit- 
uation. Harriman's attempt failed, and of 
the new company that was then formed, the 
Northern Securities Company, Mr. Morgan 
named the directors. The Northern Se- 
curities Company was planned by Morgan 
himself to take care of Northern Pacific 
and the Great Northern, and assure the con- 
trol of these railroads to the present holders 
of the stock for future time. "I wanted," 
said Mr. Morgan, ''to put it in a company 
with a capital large enough so that nobody 
could ever buy it." But the Supreme 



250 J. PIERPONT MORGAN 

Court called it a violation of the anti-trust 
law and dissolved the company, and the con- 
trol was dealt out otherwise. 

The very next year Mr. Morgan was forced 
to bestir himself to protect another prop- 
erty, and it cost him something. John W. 
Gates, with a nmnber of his speculative 
friends, succeeded in buying a majority of 
the stock of the Louisville & Nashville Rail- 
way. Convinced that Gates had bought the 
road merely as a speculation and without 
any intention to manage it, and that there 
was no telling what he might do to demor- 
alise the Southern Railway system, Mr. 
Morgan sent his partner, George W. 
Perkins, to see Gates and buy the L. & N. 
from him at once. It happened to be some- 
time after midnight when this decision was 
reached, and was, in fact, about three in 
the morning when Perkins got Mr. Gates 
out of his bed at the Waldorf. 

The former Wire King had no benev- 
olent feelings toward Morgan & Co. — the 
year before Mr. Morgan had firmly elim- 
inated him from the management of the 
Steel Trust — and he now remarked coolly 
to Perkins: ''Since you want that stock 



SPIRIT OF COMBINATION 251 

so badly, to keep your friends in control and 
protect the Southern, I will let you have it. 
But you must pay me ten millions more 
than it cost." 

And the deal was closed on that basis. 

The enterprises Mr. Morgan controls are 
not merely the strongest and most ably 
planned of the modern combinations; 
usually they possess some special advantage 
or element of security outside of mere ability 
in management, which enables them to pull 
through in the worst of times, and makes 
them pretty certain inheritors of future 
business. They are apt to have an element 
of advantage which prevents them from 
ever becoming the victims of deadly compe- 
tition. The Steel Corporation controls un- 
measured sources of supply of raw material ; 
its competitors control very little ; the thou- 
sands of miles of railroad Mr. Morgan is 
identified with control rights of way, coal 
lands, terminals, competing lines, steamship 
connections and so on. 



CHAPTER XII 

A PEKIOD OF REACTION 

AS early as 1893, Mr. Morgan's atten- 
tion was called to the demoralised 
condition of the ocean-carrying steamship 
companies, due very largely to excessive 
competition. There were any number of 
tramp steamships which offered to carry 
ocean-going freight, at rates much less than 
those which were necessary for the incor- 
porated steamship companies to maintain, 
if they were to pay operating expenses, 
fixed charges and fair dividends upon the 
capital. 

This demoralisation continued until at 
last it was seen that something must be 
done, or else liquidation, and bankruptcy, 
would be the fate of some of the weaker 
incorporated steamship com]3anies. It had 
long been the hope of American trunk line 
railway managers to see an American line 
plying between some one of the Atlantic 

252 



A PERIOD OF REACTION 253 

ports, either New York or Philadelphia, 
and Great Britain. That desire led to the 
organisation of the American Steamship 
Company, which was sponsored in part by 
the railway capital or influence of the 
Pennsylvania. But the American Line 
was not very successful, and at one 
time it seemed likely that it would be com- 
pelled to go out of business. 

Shortly after the amazingly successful 
organisation of the United States Steel 
Corporation Mr. Morgan, while on his way 
to Europe, was bluntly asked by a man of 
steamship capital, if it would be possible 
to bring the various North Atlantic steam- 
ship lines under one management and prac- 
tically one ownership. Mr. Morgan's re- 
ply was: ''It ought to be." He was as 
laconic as ever. But the notion, if it were 
not already in his mind, gained foothold 
there, while he was upon this ocean trip. 

He at once saw, however, that in many 
of its features, an ocean steamship combina- 
tion would necessarily differ from those 
characteristic of the United States Steel 
Corporation's organisation. AU of the 
corporations which came into the United 



254 J. PIERPONT MORGAN 

States Steel Corporation were American- 
chartered institutions; all were operated in 
the United States and were subject to State 
and Federal laws; but, if there were to be 
an ocean steamship corporation, it would 
involve the creating of a powerful combina- 
tion, through the assimilation of corpora- 
tions flying the British flag, and probably 
the flags of some of the Continental nations, 
as well as steamship companies chartered in 
the United States. That would be an inter- 
national corporation, and the first one of 
its kind ever proposed. There had been 
many attempts to secure international trade 
agreements between manufacturers of like 
products; but none to incorporate under 
one authority companies chartered both by 
Great Britain and the United States. 

Accordingly, Mr. Morgan set counsel to 
learn whether anything in our own laws 
prevented a combination which would ab- 
sorb American steamship companies with 
those chartered in Great Britain or Europe. 
The investigation did not require much 
time. It showed that no obstacle in the law 
stood in the way of perfecting an ocean 
steamship combination. There was no 



A PERIOD OF REACTION 255 

question about the right and the ability of 
steamship corporations chartered by Great 
Britain to be absorbed by one great sup- 
porting company. The amount of money 
necessary for financing a proposition of 
that kind, or the aggregate financial prop- 
osition, did not compare in magnitude with 
the vast sum represented by the organisa- 
tion of the United States Steel Corpora- 
tion. 

Early in the summer of 1903, the plan 
of the steamship combination was so far 
along that it was possible to obtain a 
charter. The proposition involved the own- 
ership by a new company of the entire cap- 
ital stock of the White Star Line, Atlantic 
Transport Company, International Nav- 
igation Company, of the American and Red 
Star Lines, the Mississippi & Dominion 
Steamship Company, of the Dominion 
Line, whose steamships made their Ameri- 
can Terminal at Boston; of the Leyland 
Line, and of the National Steamship Com- 
pany, this company being naturally in the 
ownership of the Atlantic Transport Com- 
pany. 

To be successful, a combination of this 



256 J. PIERPONT MORGAN 

kind must include many distinct services. 
It ^YOuld have to include service from New 
York, Boston, Philadelphia, New Orleans, 
Baltimore, Galveston, in the United States, 
Montreal in Canada, Liverpool, Southamp- 
ton, London, Cherbourg, Antwerp, and 
ought also to operate from British ports 
and Australia, and further operate in ports 
of the Mediterranean, the West Indies and 
Mexico. The attempt was never seriously 
made to bring the Cunard Company, which 
was the original steamship company between 
Europe and the United States, into the 
combination, for it was apparent from the 
beginning that the British Government 
would never permit anything of the kind. 
The corporation was incorporated under 
the name of the International Mercantile 
Marine Company. It was inmiediately 
dubbed the North Atlantic Steamship 
Trust. 

The amount of money to be provided was 
not, according to the modern view, very 
large. The company was authorised to 
capitalise on the basis of sixty millions com- 
mon, and sixty millions preferred stock. A 
voting trust agreement was also provided, 



A PERIOD OF REACTION 257 

to last until October 1st of next year; and 
the voting trustees named were J. P. Mor- 
gan, Charles Steele, a partner in Mr. Mor- 
gan's house; J. Bruce Ismay, the head of 
the White Star Company; P. A. B. 
Widener, and W. J. Pirrie. Without 
much difficulty, the terms of exchange by 
which the International Mercantile Marine 
Company stock was to pay for the stock of 
the various steamship companies which 
were absorbed, was agreed to; and there 
was provision for a large cash payment in 
addition, the sum of $25,000,000 in gold, to 
be paid at London, on January 1st of the 
year of incorporation. 

Mr. Morgan had an underwriting propo- 
sition prepared. It was intended that op- 
portunities to subscribe to the underwrit- 
ing proposition should be given pro rata to 
almost all those who had been invited to 
come into The United States Steel Cor- 
poration underwriting syndicate. The bril- 
liant success of the underwriting of The 
Steel Corporation proposition, and the com- 
mon disposition to accept any invitation of 
that kind which came from Mr. Morgan — 
the truth being that when he put your name 



258 J. PIEEPONT MORGAN 

down, the thing was as good as done, and 
you thanked your stars it was on the list 
— led to the instant full subscription to the 
underwriting plan. 

The payment of twenty-five millions in 
gold, which was to be made on the 1st of 
January, 1903, to stockholders of European 
steamship companies, who were to receive 
part pa}Tiient for the stock in cash, was an 
exploit in its way. 

The United States, at that time, was in a 
very demoralised business condition; there 
were bankruptcies of various industrial 
corporations which had been over-pro- 
moted; and it would have upset the money 
market had arrangements been made in 
New York to procure the necessary amount 
of gold to meet this obligation in England. 
Therefore Mr. Morgan provided for the se- 
curing of very large amounts of bills of ex- 
change, which represented American ex- 
ports to Great Britain. Conmiunication 
was speedily established between all of the 
various financial centres where agi'icultural 
bills of exchange are customarily drawn. 
Large amounts of cotton bills were obtained 
in New Orleans and in other Southern 



A PERIOD OF REACTION 259 

cities. In the same way bills representing 
shipments of grain and meat to Europe 
were secured. The market was systemat- 
ically and thoroughly ransacked, and in due 
time Mr. Morgan had secured a sufficient 
amount of bills of exchange to make it pos- 
sible to utilise them in London, and was able 
to secure the gold needed to pay the 
twenty-five millions. 

But there was a greater difficulty, one 
which could not be overcome. Just at the 
time this underwriting syndicate was or- 
ganised, there came the woful depression 
in the securities market, which is now re- 
ferred to as ''the rich man's panic." 
There were many bankruptcies among over- 
promoted institutions. The common stock 
of the United States Steel Corporation fell 
to a little under ten dollars a share. The 
panic was general, and it was absolutely im- 
possible to induce the public to buy any se- 
curities, especially any offered by a newly- 
organised combination. Instead of think- 
ing of buying, all were trying to sell. The 
result was that the underwriting sjmdicate 
was compelled to take and carry the stock 
it had subscribed for; Mr. Morgan's friends 



260 J. PIERPONT MORGAN 

were hit hard for once, and there was gen- 
eral disposition to speak of this organisa- 
tion as both a commercial and a financial 
failure. This statement was correct, then. 

Graduall}^, however, the organisation of 
this combination is justifying itself. It 
has served, in great measure, to put an end 
to the demoralisation of ocean steamship 
conmierce ; it has steadied the rates charged 
for ocean-going freight; and, with the re- 
vival of business, which is now looked for 
in the near future, it is thought that the 
wisdom of the organisation will be justified 
to the stockholders and to the public. The 
company's balance sheet shows that it now 
possesses property of an appraised value 
of two hundred and three millions. 

While some of Mr. Morgan's close busi- 
ness friends expressed dowTiright regret 
that the attempt had been made to organise 
an ocean steamship combination at this 
particular time, the majority of them re- 
tained their confidence in him unimpaired. 
One of the men of capital in Wall Street 
said to a friend: 

''Well, Mr. Morgan has at last fallen 
down in one of his great undertakings." 



A PERIOD OF REACTION 261 

*'No," said the other, ** Morgan has not 
fallen down; the attempt will ultimately 
succeed. The plan was hit hard at the be- 
ginning by a sudden panic out of a clear 
sky, which has affected all American in- 
dustries. But it was only a set-back — 
wait." 

About the same time that the marine 
combination was under way, another in- 
dustrial amalgamation was occupying Mr. 
Morgan. The leading manufacturers of 
harvesting machines and agricultural im- 
plements of all kinds had been greatly dis- 
satisfied for some years with trade condi- 
tions. The competition was intense, some 
of it of the cutthroat kind. Moreover, the 
cost of manufacturing was believed to be 
much greater than it would be if there were 
combination, cooperation and systematic 
organisation. Chief among those who were 
persuaded that a combination would put an 
end to these demoralising conditions was 
the McCormick Harvesting Machine Com- 
pany. All of the companies whose owners 
were inclined to accept the combination 
idea were situated in the Mid- West, most of 
them in the vicinity of Chicago. As soon 



262 J. PIERPONT MORGAN 

as he decided to undertake the work of 
organising a combination in this field, Mr. 
Morgan turned over the task of arranging 
the details to his partner, Perkins. And at 
the same moment that the hand of J. P. Mor- 
gan was applied to their difficulties, the 
bloodthirsty warfare between the various 
companies ceased abruptly ; they left the is- 
sue to him. 

The plan of the Harvester *' Trust" pro- 
vided for the bringing into the new com- 
pany ten harvesting and farm-implement 
manufacturing plants, and five twine mills, 
the products of some of which were very 
large. It was also necessary to take in sev- 
eral foreign companies, one in Canada, one 
in France, one in Germany, and one in 
Russia. The company was incorporated in 
August, 1902, under a New Jersey charter. 
Its authorised capital was sixty million dol- 
lars, this being increased, eight years later, 
to eighty millions of common stock, and 
sixty millions of preferred stock. Every 
dollar of this stock, as originally issued, one 
hundred and twenty millions, was paid for 
in cash and negotiable property. It was 
also provided that, at the organisation, the 



A PERIOD OF REACTION 263 

company was to have no bonded or other 
funded indebtedness; the company was or- 
ganised without a doUar of debt of that kind. 
The balance sheet in 1909 showed that the 
company had assets of ahnost exactly one 
hundred and seventy-eight millions. Its 
business in 1909 brought to it nearly eighty- 
seven millions for sales of machinery and 
other products; and, after deducting the 
cost of production, and appropriations for 
administration, allowance for depreciation, 
and appropriations for improvements, there 
w^as left nearly fifteen millions' profit avail- 
able for dividends and surplus. 

If the organisation and financing of the 
International Mercantile Marine Company 
was a comparative failure, the organisation 
and financing of the so-called Harvester 
Trust was, from a business standpoint, a 
brilliant success. Thus, in three years' 
time, Mr. Morgan organised and financed 
three of the largest modem industrial com- 
binations, the United States Steel Corpora- 
tion, the International Harvester Corpora- 
tion, and the International Mercantile 
Marine Company, two of which were suc- 
cesses from the start, and one of which was 



264 J. PIERPONT MORGAN 

a partial failure, because of panic condi- 
tions which arose just after the corporation 
Avas promoted. 

But the robust confidence of Mr. Mor- 
gan's circle of business friends, a perma- 
nent feeling which easily endured the 
failure of the marine underwriting, even 
though it imposed upon them a hea\^ fi- 
nancial burden, was by no means shared by 
the general public. By the flotation of the 
billion dollar steel corporation Mr. Morgan 
arrived upon a pinnacle ; the glamour of the 
Morgan name was never so great, before or 
since, as at that time, when it resulted in 
selling thousands of shares of the stock of 
this company in corners of Asia and Africa, 
where no American security had ever been 
sold before. For a time the public raved 
over J. P. Morgan; it was not popularity 
they awarded him, but an enormous admira- 
tion, a kind of awe. The collapse of Steel 
stock, which, following the tremendous de- 
cline of the market in 1903-04, dropped, 
from 95 to 105 for the preferred and 40 to 
50 for the common, way doA\ai to 49 for the 
preferred and 8 for the common, brought 
about a sharp and terrible reaction from the 



A PERIOD OF REACTION 265 

hero-worship of 1901. Mr. Morgan saw 
that the decline was temporary and advised 
holding on, but thousands of holders of 
Steel stocks were convinced in their own 
minds that it meant disaster, and they 
sacrificed their securities at the low prices 
of the hour. They became convinced that 
the Steel Corporation was nothing but a 
gigantic promotion for promoter's profits, 
and saw in J. P. Morgan no longer an epoch 
making organiser of stable and secure prop- 
erty, but a monster, a corsair, ruthless, 
brutally indifferent to all considerations 
save those of personal profit — character- 
istics utterly different from those upon 
which the solid prestige of the Morgan firm 
had been founded. The failure of the steam- 
ship combination was a factor in this re- 
versal of public opinion ; and still more cap- 
ital was made out of the connection of his 
name with a certain doomed and hapless 
structure in which a set of amateur pro- 
moters attempted to apply the principle of 
combination to American shipbuilding. 

The weird careeer of the Shipbuilding 
Trust, as it was called, need not be related 
fully in a life of J. P. Morgan; but it is 



266 J. PIERPONT MORGAN 

quite necessary to describe the operations 
to the extent of showing exactly what Mr. 
Morgan and his firm had to do with the af- 
fair. Incidentally, the thing affords an im- 
pression of the helpless incompetence of 
ordinary business men to effect a combina- 
tion of this kind and carry it through. 

A set of promoters, chief among whom 
was John W. Young, son of the Mormon 
prophet, tried for years to promote a ship- 
building combination, but the undertaking 
hung fire. They tried it in 1899, and then 
in 1900, and then, the next year, they in- 
duced Henry W. Poor to take the under- 
writing, but he let go at the crucial moment 
and the plan fell through once again. At 
last the promoters succeeded in interesting 
D. Le Roy Dresser, the president of the 
newly organised Trust Company of the Re- 
public, who knew nothing about finance, 
having been a merchant the greater part of 
his life. Mr. Dresser, with his new trust 
company, plunged into the scheme with an 
abundance of enthusiasm and an absence of 
sound judgment which were destined to 
make of the trust company with the high- 
sounding name a ruin. Lewis Nixon, also, 



A PERIOD OF REACTION 267 

a practical ship constructor, but not in the 
least a financier came into the iU-starred 
venture. 

Eight companies were brought into the 
combination — three New Jersey companies, 
the Cauda Manufacturing Co. of Carteret, 
S. I. Moore & Sons, and Nixon's own yard 
at Elizabethport ; the Bath Iron Works, and 
the Hyde Windlass Co., of Bath, Maine ; the 
Eastern Shipbuilding Co., New London, 
Conn.; Harlan & Hollingsworth Co., 
Wilmington, Del., and the Union Iron 
Works of San Francisco. It was an odd 
collection to bring together; the individual 
capitalisations ranged all the way from 
Cauda 's inventory of ^' small real estate" 
to two millions for the yard in San Fran- 
cisco; some paid dividends, others were ac- 
customed to go through a crisis when called 
upon to meet the weekly pay roll. The 
combination, when it was announced, struck 
the public as a mixture of some good brandy 
with very much water. The promoters 
themselves felt that more could be done 
with the subject. The London underwrit- 
ing, moreover, and a large amount of the 
Paris underwriting had to be abandoned. 



268 J. PIERPONT MORGAN 

and although Mr. Dresser, by request, 
stepped into the breach and added the 
amount of the deficiency to the total he had 
agreed to place in America, it was still ad- 
visable to strengthen the corporation with 
the public in some w^ay. 

At this juncture Charles M. Schwab 
chanced to meet Nixon and Dresser at the 
lunch hour at the Lawyers' Club, and pro- 
posed to sell them the Bethlehem Steel 
Company. He said it was just what they 
wanted to put into their trust ; a strong, rich 
steel plant, with which they could manu- 
facture armour plate and build battleships 
complete in their own shipyards. The fact 
that the Bethlehem was for sale had been 
known for some time; Nixon had seen the 
possibilities himself long before, and was 
therefore all ready to become enthusiastic 
over Schwab's proposal. How Schwab 
happened to have the Bethlehem Steel 
Company to sell may be told in a few 
words. He bought it on his own account 
several months before. But Mr. Schwab 
was president of the United States Steel 
Corporation, a competitor of the Bethle- 
hem. As soon as Morgan & Co. heard what 



A PERIOD OP REACTION 269 

Schwab had done, he was told that he 
couldn't remain president and at the same 
time engage in the independent steel busi- 
ness. "Your time," he was told, "belongs 
to the United States Steel Corporation, and 
you'U have to give this thing up." And 
Schwab saw the point and turned over to 
the United States Steel Syndicate, of which 
Morgan & Co. were managers, the bargain 
he had made. The Steel Syndicate bought 
the Bethlehem from Schwab and agreed to 
carry it along for him until he could find a 
purchaser. And in Nixon and Dresser, 
Schwab had found ideal buyers — from the 
seller's point of view. 

For the promoters of the shipbuilding en- 
terprise, regarding Bethlehem as their 
principal asset, and unable to restrain their 
eagerness to bring in Bethlehem as an off- 
set to some of the "cats and dogs" in their 
list of companies, readily agreed to all of 
the conditions proposed by Schwab and em- 
bodied in a contract by his lawyer. Max 
Pam. The capitalisation was raised from 
thirty-six millions to about seventy-one mil- 
lions, and on the appomted day Nixon and 
Dresser met Pam at the office of J. P. Mor- 



270 J. PIEKPONT MORGAN 

gan & Co., who acted in the matter as man- 
agers of the United States Steel Syndicate, 
and the transfer was arranged. The lawyer 
gave Perkins Schwab's check for about 
seven million dollars, which was the price 
the latter had paid for the company, and 
received orders for ten million dollars' 
worth of the preferred stock of the ship- 
building company, ten millions of the com- 
mon, and ten millions of bonds. As the 
agreement contained a remarkable provision 
conferring voting power ujDon Schwab's 
bonds, the net result of the transaction was 
that Nixon did not buy the steel company, 
but turned over to Schwab the shipbuilding 
combination. There were forty-five mil- 
lions of stock, and Schwab's twenty millions, 
together with the voting power of his bonds, 
gave him absolute control. 

A terrific tangle followed in which it 
gradually became clear, as the affairs of the 
enterprise went from bad to worse, that the 
shipbuilding company was absolutely de- 
pendent upon the Bethlehem for its life — 
it was the only live asset, and that there was 
no disposition on the part of Mr. Schwab 
to risk the sacrifice of the Bethlehem Com- 



A PERIOD OF REACTION 271 

pany. His contract had been drawn so as 
to safeguard the Bethlehem absolutely. 

The underwriting fell flat ; nobody would 
buy the securities of the new combination, 
which was thrown into bankruptcy, and 
finally disintegrated. The failure of the 
Trust Company of the Republic, which was 
dragged down in the wreck, and the un- 
sound character of the venture generally, 
placed in an unfavourable light everyone 
concerned. The fact that Morgan & Co. 
had handled the Bethlehem for Schwab was 
sufficient to create a loose impression that 
Mr. Morgan himself was a favoured insider, 
and when, in the course of the hearings m 
the bankruptcy proceedings, it was brought 
out that there was in existence a "sell mine 
first" agreement applying to the shipbuild- 
ing stock held by Morgan & Co., the hostile 
feeling of the public toward J. P. Morgan 
himself was so much the more increased and 
strengthened. 

What had happened was this: When 
Schwab gave his personal check to Perkins 
in pajTuent for the Bethlehem company he 
seemed to have forgotten that he owed the 
firm interest at six per cent, on cash which 



272 J. PIERPONT MORGAN 

they had put up for him for a year in carry- 
ing along the company while he was seeking 
a purchaser. Also J. P. Morgan & Co. had 
used none of the Bethlehem's earnings dur- 
ing the year it had carried the stock. The 
Schwab check did not include this interest. 
When it was demanded of him, he suggested 
that the steel syndicate managers take in 
shipbuilding stock what they felt was due 
them, of which stock Schwab possessed a 
large supply. Without being especially 
anxious to make this arrangement, the Mor- 
gan firm finally agreed to it, and received 
five million dollars' worth of this stock. 

John W. Gates was then running a stock 
house, and he was engaged to ''make a 
market" for the shares. The stock of the 
insiders was pooled, and the members of the 
pool made a written agreement with Gates 
to put out the stock in a certain way ; it was 
an agreement of the kind which is bluntly 
called a "sell mine first" agreement, a de- 
vice of the "street" intended to enable in- 
siders to dispose of their holdings rapidly 
and at the best prices that can be ob- 
tained. If a man ordered Gates to buy 100 
shares of shipbuilding stock, the house 



A PERIOD OF REACTION 273 

would send out to the curb and buy a block 
of fifty, and at the same tnne put in fifty of 
the pool shares at the same price; which 
had the double and desirable effect of creat- 
ing a business in the stock, and at the same 
time of working off the heavy holdings of 
the pool. Schwab suggested to Gates that 
as the syndicate managers, namely Morgan 
& Co., had treated him very "white" in this 
whole matter, it would be "a nice thing to 
do" to include their stock — the stock he had 
turned over to them in lieu of interest 
money, etc. — in the pool agreement. The 
name of J. P. Morgan & Co. was inserted in 
the paper with the expectation that Morgan 
would sign it. This offer was taken to the 
Morgan office, and when read by his part- 
ners — Mr. Morgan was in Europe at that 
time — was rejected positively. The firm 
would have nothing to do with such a bar- 
gain. 

As no one would buy the stock anyhow, 
this pool agreement never got beyond the 
paper stage; but when fetched forth at the 
post mortem of the shipbuilding combina- 
tion it was used with sensational ef- 
fect, both by the newspapers and by 



274 J. PIERPONT MORGAN 

the bear clique, which at that time was 
pounding at the price of Steel stock and de- 
claring that all that had happened to the 
United States Shipbuilding combination 
would happen likewise to United States 
Steel. Mr. Morgan was urged again and 
again to make a public statement, defend- 
ing himself and setting forth all the facts 
of the shipbuilding matter as far as Morgan 
& Co. were concerned. He always refused, 
saying, very characteristically, that none of 
the members of the steel syndicate had 
asked him to answer any questions or to 
give an explanation of any sort. To his 
mind they were the only ones who had the 
right to question him — and they were sat- 
isfied. 

Here this chapter on the spirit of com- 
bination as the backbone of Mr. Morgan's 
business life may well end. He began by 
reorganising railroads which had fallen into 
dire straits financially; then he went on 
from this point and combined small and 
comparatively weak railway units into units 
big and powerful; and then he applied the 
same methods to manufacturing industries. 



A PERIOD OF REACTION 275 

In all these operations the business motive 
and aim was to create institutions which 
would find a ready sale for their stock, and 
permanent value in the same. The elmina- 
tion of competition, of which so much has 
been said, almost invariably placed his com- 
bination on a stable and prosperous footing ; 
another side, which is of great importance in 
dealing with this movement, is that while 
the stock of small individual industries, 
however prosperous they were, could have 
only a local sale, a sort of neighbourhood 
market, the moment they were brought to- 
gether and given a name to be known all 
over the nation, the stock of the new com- 
pany could be offered, and would be taken 
up, far and wide. It is clear that this move- 
ment toward combination finds its lease of 
life in this latter condition of affairs. In 
other words, if these giant organisations 
are mismanaged or abused by those in con- 
trol, or if they were not in the beginning 
well conceived and organised, their securi- 
ties will fall off in value imtil their dis- 
integration into the original units becomes 
the one desirable and business-like thing to 



276 J. PIERPONT MORGAN 

effect. That would be the work of a man 
proceeding in a direction exactly the reverse 
of Mr. Morgan's. 

In the past twenty years we have seen 
many kinds of men at work in the field of 
changing conditions, some building up in- 
stitutions like the Standard Oil or the 
Woollen Trust as a means of making and 
keeping an enormous personal fortune; 
others, opportunists, dipping in and getting 
out w^henever they see the vision of a pos- 
sible "clean-up"; but Mr. Morgan in his 
long life has not been a simple fortune- 
maker of either class — he has been the maker 
of industries, the consistent agent of solid 
business conditions. Yet there are many 
who distrust w^hat they call the "Morganisa- 
tion" of industry, wdth their eyes fastened 
upon the social flaws inherent in these same 
wonderful organisations of his. 

In writing this life the author would 
not for one moment belittle, by ignoring it, 
the force of this point of view. But if 
wholesome and right, it is also vague and 
aspiring, and would bring only confusion to 
the simple task of setting down here the 
events of J. P. Morgan's life. Nothing is 



A PERIOD OF REACTION 277 

to be gained by ascribing to a man aims 
which he never possessed, or by forcing the 
lack of such aims as an issue against him. 
To write his life from a sharp "uplift" 
angle would be to produce an unreal and 
senseless image, containing few features of 
the man himself. When this point of view 
shall be embodied in a set of changes it will 
then undoubtedly furnish a luminous com- 
parison with present conditions to show how 
crude, relatively, and in the rough they are. 



CHAPTER XIII 

WORLD BANKING 

THE leadership of J. P. Morgan con- 
ducted the United States into the field 
of international financing. The real test of 
the ability of a nation to rank itself with the 
great money powers of the world is fully 
met when its bankers become the creditors 
of another nation. When the Rothschilds 
or the Baring Brothers underwrite a for- 
eign national loan, then, through that action, 
they make the nation of which they are citi- 
zens to a greater or less extent a world 
money power. Before the beginning of the 
twentieth century the United States never 
entered into relations of this kind; always 
this country had been the debtor of other 
nations. But the immense accumulation of 
capital seeking investment, and the intimate 
relations which were being established be- 
tween American and European bankers — 
together with convincing proof that the 

278 



WORLD BANKING 279 

prosperity of the country was now assured 
— made it possible for American bankers 
like Mr. Morgan to undertake the making 
of foreign loans. 

In other words this country, which for 
fifty years had held out its hands to the 
world for money with which to develop its 
great industries, reached the position a lit- 
tle more than ten years ago where it had 
a superfluity of its own to dispose of in fi- 
nancing the needs of other countries. 

The first foreign loan ever negotiated in 
this country was made through Morgan and 
Company to the Republic of Mexico in the 
year 1899. Mexico entered the market with 
a proposition for a sale of national bonds, the 
chief purpose of which was to refund earlier 
national obligations, and Mr. Morgan and 
his associates speedily came to terms with 
the Mexican Government and underwrote 
the entire issue. The matter attracted less 
attention than was its due, considering the 
significance of such an event in the life of 
this country. But the loan itself was not 
large, and there were already in Mexican 
railroads and mines vast amounts of Ameri- 
can money. 



280 J. PIERPONT MORGAN 

Two years later, England came seeking a 
loan. Now, it was English money which 
built our railroads; for half a century 
American business had been almost de- 
pendent upon supplies of English capital; 
our government bond issues, although they 
were financed in New York and Philadel- 
phia, had eventually been sold in great 
quantities throughout Great Britain. Con- 
sequently it meant much to our national 
pride of position to turn the tables on the 
mother country — to have money to lend 
w^here we had always been accustomed to 
borrow or receive. Mr. Morgan was in Lon- 
don when the British Government started 
out to borrow sums with which to pay the 
expenses of the South African War. He 
informed the British Minister of Finance 
that America was prepared to take a con- 
siderable portion of that loan. When the 
allotments w^ere made public in April, 1901, 
it was discovered that Mr. Morgan, for him- 
self and his associates, had underwritten 
fifty million dollars. 

This underwriting was very successful; 
that is to say, it was almost instantly ab- 
sorbed, chiefly by the leading banks of the 



WORLD BANKING 281 

United States. And tlie transaction ranked 
this country, for the first time, among the 
money powers of the world. Although the 
total amount was small compared with some 
of the national loans underwritten by the 
Eothschilds and the Barings, or the Russian 
loan, underwritten by the French bankers, 
yet it was great enough to thoroughly es- 
tablish the fact that the United States was 
at last prepared to take its share of impor- 
tant national loans. 

Some two or three years later the war be- 
tween Japan and Russia drove each of these 
nations into foreign markets for money. 
Russia, as usual, turned to France; Japan 
looked to England, and then her represent- 
atives were told that Japan would undoubt- 
edly find it possible to persuade American 
capitalists to supply a good portion of her 
needs. Mr. Morgan, with two other inter- 
national banking leaders, underwrote all of 
the Japanese war loan which was offered to 
the United States. Later, Mr. Morgan un- 
derwrote the Honduras loan, part of the 
Argentine loan, and he is usually under ne- 
gotiation with some one or other of the 
South and Central American States, which 



282 J. PIERPONT MORGAN 

approaches the American market seeking 
loans with which to refund its overdue obli- 
gations. 

In the early part of the second adminis- 
tration of Theodore Roosevelt, Mr. Morgan 
gained very important concessions involving 
the construction of a railroad in the in- 
terior of China. It was arranged to invest 
\ about fifty millions of American capital in 
this enterprise. But there arose in China 
a very intense popular opposition to the use 
of foreign capital for this purpose. The 
Chinese Government was finally forced to 
heed this popular feeling, and it informed 
the administration at Washington that if 
the Americans insisted upon carrying out 
their undertaking "under these concessions, 
dangerous friction would be engendered. 
No one here knew exactly what the cause 
of the trouble was, but it was clearly serious. 
There was much to be said in favour of 
pressing the precise legal rights of the 
Americans in this controversy ; more or less 
talk went the rounds to the effect that our 
government would be called upon to bring 
diplomatic pressure to bear upon China to 
permit the American concessionaires to go 



WORLD BANKING 283 

on with their work. But J. P. Morgan was 
then in Europe, and, although people might 
talk of what they would do, they were al- 
ways careful really to do nothing until "J. 
P." had said the word. 

As soon as Mr. Morgan learned of these 
embarrassments he cut short his European 
visit and, returning to America, went 
straight to call upon President Roosevelt at 
Oyster Bay. He intended to have a frank 
conversation with the President, and to dis- 
pose of the matter in his own wa}^ He did 
both things, saying to the President that if 
it would relieve the administration at Wash- 
ington of any embarrassment and tend in 
any way to maintain the friendly relations 
between China and the United States, the 
Americans would cancel the concession, 
only asking that China be required to make 
up the money already expended. Roosevelt 
was only too glad to accept this way out of 
the difficulty, and the concessions were can- 
celled and the Chinese Government bound 
itself to repay the American concessionaires 
in full. 

But within two years the Chinese Gov- 
ernment was making proposals to foreign 



284 J. PIERPONT MORGAN 

bankers involving a loan of fifty million 
dollars for the construction of railroads in 
two of the larger provinces. Although this 
loan was not technically a national one, the 
principal and interest were to be guaran- 
teed by China. The diplomatic correspond- 
ence again started up; it seemed that the 
United States was not to be invited to share 
in the flotation of this loan. A long diplo- 
matic struggle followed, and in the end it 
was agreed that the United States should 
share upon equal terms with Germany, 
Prance and England, which are the three 
nations of the world to whom appeal is 
made by other nations when the financing 
of national obligations is undertaken. The 
Morgan syndicate underwrote the American 
share of this loan. 

These transactions added more and more 
to Mr. Morgan's stature as an influence in 
international finance ; he was the first Amer- 
ican to reach a position beside the Roths- 
childs, a century old; the first American 
banker to compete in any way with foreign 
bankers in the domain of those giant finan- 
cial propositions behind which stands the 
credit of a nation. 



WORLD BANKING 285 

In 1910 it was announced that J. P. 
Morgan had bought a block of 502 shares 
of the Equitable Life Assurance Society, for 
which he paid approximately at the rate of 
five thousand dollars a share. The news 
became a topic not only of local, but of na- 
tional interest. This life insurance com- 
pany, with its enormous assets, with its sur- 
plus amounting to eighty-five millions, was 
a tremendous factor in the money markets. 
It was the operation of this society for 
the promotion of securities, and its owner- 
ship or control of very large financial in- 
stitutions, which led to the Hughes inves- 
tigation of 1904-05, an event which reached 
the proportions of a very great national 
scandal. When the Equitable fell into diffi- 
culties, Thomas F. Ryan bought this block 
of 502 shares from James Hazen Hyde. In 
order to satisfy the public that the manage- 
ment of the Equitable would be sound and 
ethically right, he promptly transferred all 
authoritj^ which vested in that stock to a 
board of trustees. These trustees were ex- 
President Grover Cleveland, George West- 
inghouse, and Justice Morgan J. O'Brien. 
Every power which the ownership of this 



286 J. PIERPONT MORGAN 

stock carried, except the power to transfer 
it, was vested in these trustees. They were 
expected to elect directors who would rej^re- 
sent the policyholders, and by such repre- 
sentatives give the policyholders a large 
share in the management of the company. 
After a few years, Harriman, who had al- 
ways wanted that stock, succeeded in buying 
half of Ryan's interest. When Harriman 
died Mr. Morgan had no difficulty in ac- 
quiring it all. 

Several months passed before he named 
the new board of trustees; these were ex- 
Justice O'Brien, George W. Perkins, an 
acknowledged insurance expert and for ten 
years a partner of Mr. Morgan, and Lewis 
Cass Ledyard. Policyholders all over the 
world were eager to know what Mr. Mor- 
gan proposed to do with the Equitable ; why 
had he bought the controlling interest? 

Then came assurances that Mr. Morgan 
had two purposes in doing this, both of 
them, as he believed, in the interest of the 
society and of the public. First, he in- 
tended to have this majority stock so 
trusteed that the voting power would always 
be exercised wholly in the interest of the 



WORLD BANKING 287 

policyholders. Second, he proposed that as 
soon as a practicable method of complete 
mutualisation of the company could be de- 
vised, that the entire caj^ital stock be elimi- 
nated, and the ownership of the company 
pass exclusively into the possession of the 
policyholders. Thus be hoped to crown his 
career by bringing about an unprecedented 
and extraordinary change in the ownership 
of what is one of the greatest corporations 
in the world, in view of its assets and its 
surplus. 

The legal difficulties in the way of mutual- 
isation centre in the disposition that is to be 
made of the surplus and the manner in 
which some portion of that surplus may be 
used to pay for the capital stock in order 
that this stock may be cancelled. When 
these difficulties are straightened out by 
means of a bill in the State Legislature, the 
policyholders of the Equitable will be in 
possession of a surplus which, in the course 
of a few years, should amount to a hundred 
million dollars. It will then be possible to 
reduce the cost of premiums, either by ap- 
plying a portion of the surplus to dividends, 
or reducing the first cost of insurance. Mr. 



288 J. PIERPONT MORGAN 

Morgan, when he bought this block of 502 
shares of a capitalisation of thousand shares 
of this company, never saw the certificates 
of stock; he paid three million dollars, but 
no papers of any kind passed to show the 
sale had been made until the stock was 
transferred to the trustees, which was done 
by power of attorney. 

When Eyan sold Mr. Morgan his in- 
surance stock he also turned over to him 
two trust companies, which the latter com- 
bined with the Guaranty Trust Company 
into a single powerful institution. For a 
number of years Mr. Morgan's principal 
banking associations have been with the 
First National Bank. But with the great 
development of the combination idea came 
the need for a wider and wider control of 
capital, to be flung in great masses into the 
uses of the industrial advance, not only in 
our own country, but also in South America, 
Central America and Mexico, and even the 
Far East. It was not enough any longer to 
control one bank or two or three, for ob- 
viously the tendency to build corporations 
as big and powerful as possible argued the 
necessity of financial resources equally big 



WORLD BANKING 289 

and powerful. The leader in tlie develop- 
ment of combination among the banks was 
the National City Bank, upon the director- 
ate of which were three members of the 
Morgan firm. The National City, First Na- 
tional, the Chase National, and afterwards 
the Bank of Commerce w^ere brought into 
close and friendly relations. The Mechan- 
ics and Metals National, the Phoenix Na- 
tional, the Chatham National, and the 
Liberty were added to the list of institutions 
whose funds are at the disposal of Mr. Mor- 
gan. No less than seven New York City 
trust companies have come under his direct 
control — the Astor, Bankers*, Mercantile, 
Standard, New York, Equitable, and Guar- 
anty. His banking power, expressed in 
figures, amounts to considerably more than 
a billion dollars; his total financial power, 
in which should be included the assets of all 
the railroads and all the industrial plants in 
which the Morgan influence is paramount, 
has been estimated at nearly ten billions. 
But such figures are of dubious value, for 
only a practical test could define the limits 
of Mr. Morgan's financial influence, and 
that test will never be made. 



290 J. PIERPONT MOEGAN 

Certain items may be posted down, but 
the foundation of Ms authority is personal, 
is based upon a well-nigh universal confi- 
dence on the part of investors in the ac- 
curacy of Mr. Morgan's judgment, the 
sincerity of his aims, and his bred-in-the- 
bone honesty. Under almost any circum- 
stances the stockholders of a corporation 
with which Mr. Morgan is, or has been, 
connected would rather have him manage 
their financial affairs than any other per- 
son; they are prone fairly to dump their 
responsibilities in his broad lap ; his power 
has come to him as much in this way as 
through his own aggressiveness — though 
there has been no want of that. All this 
was illustrated most dramatically in the 
panic of 1907 : at that time the need was not 
so much for a leader as for a man who could 
be trusted to act as the agent of all the 
varied financial forces that were beating 
about in headless confusion — to handle their 
money, and to bring about the thing all 
desired without favouring anyone or com- 
mitting the banking community to any im- 
practicable course. 

At first the heads of the old, strong, con- 



WORLD BANKING 291 

servatively managed banks and trust com- 
panies — particularly of the trust companies 
— thought it possiljle that they should hold 
aloof from the troubles of the other institu- 
tions. They had done no wrong, had made 
no loans, foolish, or criminal, upon unmar- 
ketable securities; and their attitude was, 
let the guilty be punished — it's deserved. 
They failed to remember that a panic is no 
respecter of persons, that a money strin- 
gency knows not the sacred from the pro- 
fane — that all must stand or fall together 
in a storm of such fierceness as that of No- 
vember, 1907. It was Mr. Morgan who 
made them change their attitude. He saw 
at once that the only remedy for the situa- 
tion was to raise a common fund for the 
common necessities of all; and he, person- 
ally, made all contribute, under penalty, if 
they did not do so, of lacking assistance 
when the pinch should come home to them. 
It all began as early as the month of 
July, when the United States Steel Cor- 
poration reported an alarming falling off in 
orders for its products. It was to be seen 
then that conditions were shaping for an 
industrial set-back of the first magnitude. 



292 J. PIERPOKT MORGAN 

The fear that there would not be money 
enough to move the crops of that summer 
from the harvest fields to the market sprang 
up, and, along with it, a widespread dispo- 
sition to hoard money. The first really im- 
pressive proof that a financial storm was 
gathering was furnished a little later by the 
attempt of the City of New York to market 
a large block of its own bonds. The city 
offered these bonds upon a four per cent, in- 
terest basis. "When the bankers, who usu- 
ally are ready enough to buy New York City 
bonds, were asked, and refused, to make a 
proposition upon which the Comptroller 
could rely to the extent of feeling assured 
of a market for his offering, a surprising 
thing happened. The city withdrew its 
offer, in spite of needing the money, and by 
this action demonstrated what a financial 
condition there was when it was impossible 
to secure the sale of a block of bonds bear- 
ing four per cent, interest, backed by the 
credit of New York. 



CHAPTER XIV 

THE PANIC OF 1907 

THROUGHOUT the month of Septem- 
ber the men representing the big 
money interests often met in consultation; 
the newspapers were urged to talk encour- 
agingly — to assert in as many kinds of ways 
as possible that there was really nothing in 
the situation that justified the growing 
scare. Without the fear itself there would 
indeed have been nothing to breed an abso- 
lute catastrophe, but if fear should drive 
things to an immediate accounting there 
were banks and trust companies which 
would be unable to stand the test. And so 
it happened; first came the Heinze failure 
late in October, and the investigation by the 
Clearing House Committee, which discov- 
ered loans on unmarketable securities in the 
Heinze-Morse-Thomas chain of banks. The 
three men were eliminated without loss of 
time from the banking situation, but this 

293 



294 J. PIERPONT MORGAN 

came too late to save the Knickerbocker 
Trust Company, which, through its presi- 
dent, Charles T. Barney, was connected 
with some of the Morse companies. 

Mr. Barney had been in absolute charge 
of the institution; to be sure, there were 
thirty-five directors, but most of them were 
rich young men, possessed of but a meagre 
knowledge of banking, and who, moreover, 
paid practically no attention to the trust 
company's affairs. They left the manage- 
ment of the bank's affairs to the Executive 
Committee, which was dominated by Bar- 
ney; and Barney passed on all the loans, 
some of which were unknown even to the 
Executive Committee. Loans to the Amer- 
ican Ice Company, one of Morse's pet 
schemes, constituted one of the principal 
sources of the trust company's weakness. 
On the day before the Knickerbocker closed, 
Henry B. Hollins, one of the directors, 
called a special meeting of the board, and 
said that unless Mr. Barney resigned the 
l^residency the clearing house banks would 
withdraw all support from the threatened 
trust company. Accordingly, Mr. Barney's 
resignation was accepted and A. Foster 



THE PANIC OF 1907 295 

Higgins elected in liis place. Aiid everyone 
breathed freely once more, feeling that the 
day was saved. After the meeting had ad- 
journed, while some of the directors were 
discussing what they had done, a message 
came over the telephone from a bank in 
Newark that the National Bank of Com- 
merce had refused to clear the business of 
the Knickerbocker. It will be remembered 
that the trust companies left the clearing 
house association some time before, when 
called upon to increase their reserves, and 
that each trust company had formed an al- 
liance with some great bank which cleared 
its checks. The refusal of the Bank of 
Commerce to continue this relationship was 
an absolutely crushing blow, and all unex- 
pected. It threw the directors into confu- 
sion, but it was hastily agreed to hold a 
meeting that evening at Sherry's, and all 
the directors who were in town were sum- 
moned. 

The bank had ten million dollars in cash 
in its vaults, but this would be nothing in 
the event of a run. Charles W. Steele and 
George W. Perkins, of the Morgan firm, 
had been asked to the meeting, and they 



296 J. PIERPONT MORGAN 

assured the directors that undoubtedly the 
clearing house banks would stand back of 
the Knickerbocker and advance enough 
money to tide the company along. But the 
precise manner in which this tiding over 
was to be done, and who was to do it, were 
not decided. Justice Gerard, on the other 
hand, advised that the trust company close 
its doors, saying that under the circum- 
stances it would be folly to open in the 
morning. The meeting generally favoured 
opening, but underlying this determination 
on the i^art of the directors there was un- 
doubtedly a definite suspicion that the com- 
pany was moving on to its ruin. The talk 
became more and more excited as the even- 
ing drew on; doors were thrown open, and 
people who had been supping late at 
Sherry's wandered in and listened and gave 
their advice; strangers stood up on chairs 
and shouted, and in the midst of this bed- 
lam many of them slipped away to the 
Night and Day Bank near by on the Ave- 
nue and put in checks to withdraw their 
deposits. When the line formed in the 
morning outside the impressive columns of 
the Trust Company building at Thirty- 



THE PANIC OF 1907 297 

fourth Street and Fifth Avenue, the first 
man was the messenger from the Night and 
Day Bank. He held in his hand a thick 
bundle of checks, and every few minutes a 
runner would hand him some more. Among 
these was a check for a million, drawn in 
favour of the Trust Company of America. 
It was a matter of life or death with this 
latter company, the offices and halls of 
which were soon to be filled with a push- 
ing mob demanding cash on the spot for its 
deposits. 

The same evening with this meeting J. 
P. Morgan hurried into town from the 
country; his own house was closed, so he 
stayed with his son-in-law, Herbert L. Sat- 
terlee, whose residence stands at one side of 
the library on Thirty-sixth Street, as Mr. 
Morgan's own house stands on the other. In 
the morning Mr. Morgan was at his office 
when Directors John Magee and G. I. 
Boissevain, representing the directorate of 
the Knickerbocker, called upon him to learn 
what chance there was of receiving help. 
Mr. Morgan said flatly that nothing could 
be done. No arguments would move him; 
he would not listen to them. 



298 J. PIERPONT MORGAN 

To the new president, Mr. Higgins, Mr. 
Morgan was just as decided, and when 
Higgins reminded him of the many times 
he had gone to the rescue of institutions in 
distress, the financier shook his head grimly. 
<<I've got to stop somewhere," he said. 
He was willing to let this trust company 
suffer the consequences of its mismanage- 
ment ; and the actions of some failed. With 
his hat on the back of his head, and smok- 
ing his usual large black cigar, he sat at his 
desk all that morning and awaited events. 
The Knickerbocker was quickly drained of 
its cash and closed its doors. To J. P. Mor- 
gan's mind this was in a sense an unimpor- 
tant incident, rich and great as the trust 
company had been. He was thinking of the 
general financial situation and all its possi- 
bilities ; he knew that the great majority of 
the banks of New York were in a position to 
weather any storm that might break, but 
he also knew that it would be necessary to 
extend assistance to a large number of 
banks, not only in New York, but through- 
out the country, banks which, although pos- 
sessing assets that were unquestionably 
good, were going to find it impossible to 



THE PANIC OF 1907 299 

realise upon them and impracticable to call 
upon their customers for immediate pay- 
ment of their loans, since the customers 
simply could not get the money to pay with. 

As he sat there, in came a gentleman, 
who, without being announced, opened the 
gate of the railing which surrounds Mr. 
Morgan's desk, and walked up to him. Mr. 
Morgan nodded and said, "Good morning, 
Mr. Frick." The two men sat chatting 
quietly for a few minutes. You would have 
thought they were engaged in an informal 
and unimportant conversation. But, in 
reality, Frick was offering millions of the 
highest grade of securities for a purpose 
that Mr. Morgan had in mind. 

When Frick went away a little man 
came in with a quick, nervous step. Mr. 
Morgan greeted him with a nod ; the visitor 
was E. H. Harriman, who also offered to be 
one of a group who would extend aid. In 
a similar manner, one after another, some 
ten or fifteen of the men of great capital in 
New York came to see Mr. Morgan, and 
he received them quietly and impassively, 
although he knew that these men came to 
him as their leader. At last, James Still- 



300 J. PIERPONT MORGAN 

man, president of the National City Bank, 
came; receiving a most casual greeting, he 
went with Mr. Morgan into an inner room. 

Across the street, at the Sub-Treasury, 
the officers were obeying instructions sent 
them by the Secretary of the Treasury, 
George B. Cortelyou. Cortelyou was pre- 
pared to deposit with the national banks of 
the country as much as one hundred and 
fifty millions of Government money; but it 
still remained a question how the banks 
were to furnish the security required by law 
to protect deposits of this kind. Arrange- 
ments were gradually made by which the 
banks were able to borrow from savings 
institutions, and from private owners, Gov- 
ernment bonds in large amounts. John D. 
Rockefeller, for one, handed over ten mil- 
lions in Government bonds without interest. 

Some twelve millions of bonds were doled 
out to the banks, and, meanwhile, Mr. Mor- 
gan and Mr. Stillman, with one or two 
others, made arrangements to buy bills of 
exchange, chiefly cotton bills, for cotton was 
the article exported in largest quantities at 
that time; having these bills as security, 
they sent cable despatches to London ask- 



THE PANIC OF 1907 301 

ing for the immediate remittance of gold. 
Through tliis means the National City was 
able to report on the evening of the crash at 
the Knickerbocker Trust that it had secured 
some eight millions of gold which would be 
immediately shipped to the United States. 
The national banks of the entire country 
were notified that they could have Govern- 
ment deposits up to the limit of the law, 
and were also assured that Mr. Morgan 
would see to it that they could borrow the 
bonds necessary to secure these deposits. 

While the panic was still at its height 
there came a sudden annomicement that the 
United States Steel Corporation had pur- 
chased a majority of the capital stock of 
the Tennessee Coal and Iron Company, and 
was offering to buy any of the remaining 
shares upon the same terms upon which the 
majority block had been secured. This 
action had more effect than anything else 
in dissipating the heavy black cloud which 
was hanging over the banking situation. It 
virtually ended the panic. 

To this day there lurks a suspicion that 
this transaction really explains the panic ; it 
has been made the subject of two Con- 



302 J. PIERPONT MORGAN 

gressional investigations, which uncovered 
much bad feeling, but failed to dispose of 
the various charges in a decisive way. It 
is perhaps still open to anyone to think that 
Mr. Morgan, whose whole life has been de- 
voted to producing stable conditions in the 
money market, deliberately engineered a 
stupendous financial panic, which was likely 
to paralyse business, ruin industry, throw 
his ow^n interests into confusion, and set the 
country back ten years at least, simply in 
order to buy at a low price a block of stock 
valued at seventeen million dollars. Those 
who hold this opinion support it with the 
fact that T. C. & I., with its great quantity 
of ore deposits and its use of the "open 
hearth" process in making steel, was an 
enormously valuable acquisition to the Steel 
Corporation, and there isn't a doubt that 
it was. The steel people asserted at the 
time of the panic that they did not want 
the T. C. & I. and were only taking it over 
to relieve the situation. But before many 
months had passed President Gary of the 
Steel Corporation was out with a statement 
setting forth the great value of the acquisi- 
tion of this property. Putting aside the 



THE PANIC OF 1907 303 

child's talk that Mr. Morgan and his asso- 
ciates caused a nation-wide panic in order 
to grab a competing steel company, it is fair 
to conclude that although their first thought 
was to relieve the strain of the situation, 
they were by no means sorry to accomplish 
this result with future advantage rather 
than future expense to themselves ; nor was 
much sjanpathy spent, it is likely, upon the 
group of speculators who got caught with a 
collapsing stock on their hands. 

The matter was the subject of several 
noteworthy conferences which took place at 
Mr. Morgan's library; to these conferences 
came in the small hours of the morning 
most of the important figures in the Wall 
Street district, remaining until the open- 
ing of business and returning again in the 
evening. Nothing like these meetings had 
ever taken place before; it was a strange 
scene — the beautiful interior representative 
of a more artistic civilisation than ours and 
graced with recondite and dearly bought 
objects of art, and the all-powerful finan- 
cier, whose voice uttered the last word on 
every practical question, but who spoke 
little, and even seemed to listen little, to the 



304 J. PIERPONT MORGAN 

others. In comes Gary, with Lewis Cass 
Ledj^ard and one or two others to take up 
the T. C. & I. situation. The brokerage 
firm of Moore & Schley had pledged six mil- 
lion dollars of T. C. & I. stock for loans from 
various banks; the banks had called these 
loans and were insisting that Moore & 
Schley take up the T. C. & I. stock. Mr. 
Ledyard then says that there is no possible 
way to prevent the failure of Moore & 
Schley and the failure of many banks as 
well, except to purchase this stock. And 
Mr. Morgan says to Gary : 

"I don't know whether the United States 
Steel Corporation can afford to buy this 
stock or not. You know best as to that. If 
it does not buy — if the United States Steel 
Corporation or someone else does not fur- 
nish relief — no man can say what the effect 
will be on the financial situation throughout 
the country. If you can see your way clear 
to buy it, I have no doubt such action will 
relieve the situation. I will turn Mr. Led- 
yard over to you to see what you can do." 

Gary then said he would not take a step 
in the matter without going to Washington 



THE PANIC OF 1907 305 

to learn the attitude of the President and 
the Department of Justice. 

''Have they any right," asks Mr. Mor- 
gan, ''to say whether the United States 
Steel Corporation shall buy this company or 
notr' 

And Gary said, "No, they have no such 
right. But," he went on, "here is a finan- 
cial crisis ; the purpose of buying this stock 
is to overcome the panic, and if the Admin- 
istration should find out that we are doing 
this and should enjoin us on the ground that 
the acquisition of the stock created a mo- 
nopoly, why then we should have made the 
financial situation ever so much worse in- 
stead of having bettered it." 

"Then go to Washington," said Mr. Mor- 
gan. "Have a special train, and don't lose 
a moment's time." 

President Roosevelt and Attorney-Gen- 
eral Bonaparte received Gary and Frick at 
an early hour the next morning, and after 
hearing their representations, agreed that 
the Government would not intervene. The 
Tennessee Coal & Iron Company was then 
absorbed into the steel trust, the holders of 



306 J. PIERPONT MORGAN 

the stock accepting the bonds of the steel 
company in pajTiient. 

Mr. Morgan then turned his niind to an- 
other matter — the situation of the City of 
New York, which some time before, as we 
have said, had failed in attempt to market 
its bonds. It was absolutely necessary for 
the city to raise money to pay contractors 
engaged in very important public works; 
some of these contractors were in danger of 
immediate bankruptcy, and some of them 
would have been bankrupted long before 
had it not been for the toleration of their 
creditors and for occasional and incidental 
assistance obtained from banks. By the 
middle of November the strain became so 
desperate that Mr. Morgan was appealed to 
by the city administration; in October the 
banking interest had come to him, a month 
later, the city. Mr. Morgan insisted that 
the city must offer the bonds at a rate of in- 
terest sufficiently tempting to induce the un- 
derwriting of the bonds under the shaky, 
panic conditions then existing, for it would 
be necessary to resort to highly artificial 
means involving the use of clearing house 
certificates if the bonds were to be under- 



THE PANIC OF 1907 307 

written at all. The city, therefore, offered 
the bonds at four and a half per cent., and 
Mr. Morgan for himself and his associates 
underwrote the whole block. 

The change from panic conditions to the 
normal came very slowly, but within six 
weeks we had received from Europe nearly 
a hundred millions in gold, every dollar of 
which was sent to banks in various parts of 
the country to enable them to build up their 
legal reserves and to increase their loaning 
capacity. Mr. Morgan constantly advised 
the bankers of the country to take care of all 
their customers, such as merchants or manu- 
facturers who were dependent upon the 
banks for money with which to carry on 
their business. It was also decided that the 
clearing houses of the United States should 
accept good assets of banks, including com- 
mercial paper, and upon these assets issue 
clearing house certificates. The New York 
Clearing House Association issued some 
forty millions of certificates, taking high- 
grade commercial paper as security ; and Mr. 
Morgan 's prediction that paper of this kind 
would be found as good a security as Gov- 
ernment bonds was afterwards justified ; not 



308 J. PIERPONT MORGAN 

one dollar of this commercial paper de- 
faulted. 

Tlie after history of the Knickerbocker 
Trust, which met and went down imder 
the first blow of the panic, is interesting 
on account of the way Mr. Morgan's son- 
in-law, Herbert L. Satterlee, effected its re- 
habilitation. He was very materially aided 
by Messrs. Bourne, Tucker, Boissevain, and 
Hollins, who raised the large sum which the 
court decreed that the company must have 
on hand. The company closed its doors at 
noon, October 22, 1907. It opened them 
again March 26, 1908, without the loss of 
its solvency. In the meantime there were 
nearly forty-seven millions of deposits 
locked up. Mr. Satterlee, at the head of a 
committee of depositors, undertook to ob- 
tain the consent of practically all the de- 
positors to their plans, and received from 
the courts time in which to do this. The 
alternative would have been an iromediate 
liquidation of the company's assets, which 
at the prices then prevailing would have 
meant great losses ; but it was an enormous, 
taxing and at times very exciting labour to 
persuade the depositors to come into the 



THE PANIC OF 1907 309 

agreement. On the day the company opened 
it received two millions of deposits against 
half a million withdrawal. 

Before this panic of 1907 the public had 
gained the impression that Mr. Morgan 
was a retired capitalist; the events of that 
autumn completely altered their opinion. 
And from that time on the public watched 
the great man of Wall Street with in- 
creased interest and curiosity. Not merely 
the man himself and the ramifications of 
his influence and power absorbed their at- 
tention, but also the organisation which 
he had built up at Number 23 Wall Street, 
which, beside being the most conspicuous 
banking house in America, was destined 
to carry on in the future the work of J. 
P. Morgan's life. This firm now consists 
of ten members, J. Pierpont Morgan, J. 
Pierpont Morgan, Jr., Edward T. Stotes- 
bury, Charles Steele, Henry P. Davison, 
Temple Bowdoin, Arthur E. Newbold, 
William P. Hamilton, William H. Porter 
and ^Thomas W. Lamont. They were all 
selected by Mr. Morgan himself, and in 
times past his partners have always been 
selected by him, on his own personal judg- 



310 J. PIERPONT MORGAN 

ment. Some of them, like Lamont and Da- 
vison, belong to the yomiger generation; 
these two men in particular were brought 
in from the banking field and have aided in 
the work of expanding the firm's banking 
connections and control, which, more than 
anything else, is the characteristic policy 
and aim of J. P. Morgan & Co. to-day. 
For with the panic of 1907 a new era be- 
gan for the Morgan house; it has changed 
with the times ; and the secure trend of the 
times being less toward building new in- 
dustrial creations than toward safeguarding 
and refining upon the possibilities of those 
we have, the Morgan organisation is now 
on the road to becoming the one powerful 
factor in the world of banking and credit, 
in which position its influence upon all 
bu&iness will be more decisive than ever. 
Since 1907 Morgan and Company has put 
off its character as a huge promotion house 
and has taken on the functions of a great 
bank. It is thus attaining a position at 
once removed and secure at a time of po- 
litical and social readjustment wliich prom- 
ises to be the most far-reaching the country 
has ever known. 



CHAPTER XV 

THE MAN HIMSELF 

IT is to J. Pierpont Morgan, of all living 
Americans, that tlie expression of a fa- 
mous French historian is best applied — a 
force of nature; that is what he is, or, it 
may be better to say, that is what is in him ; 
an immense and unruly power, which is only 
increased by the obstacles standing in its 
way. His personality is sometimes com- 
pared with that of Theodore Roosevelt, 
because both are masterful men, who over- 
come circumstances and silence opposition 
with crushing ease. Each has proved his 
possession of a mysterious force, an uncon- 
scious force, capable of producing tremen- 
dous results. But, after that, they really 
resemble each other as little as a journalist 
resembles a man of science, or an evangelist 
the merchants who are financing his cam- 
paign. 

All the personal expansiveness, the van- 

311 



312 J. PIERPONT MORGAN 

ity, of the politician are replaced in the man 
of capital by an aloofness that is predeter- 
mined and an equally settled and ingrained 
habit of avoiding every opportunity of pos- 
ing before the crowd. If there is a single 
man, woman, or child in the United States 
who has not held the hand of Colonel Roose- 
velt, it is not Colonel Roosevelt's fault. 
Everyone knows how approachable he is, 
how friendly; that he takes the same naive 
pleasure in saluting a Swedish emigrant 
woman at a backwoods railway station in 
Wisconsin as his friend, Jacob Riis, takes 
in returning the greetings of the children of 
the slum. The flash of pleasure and the 
look seem very personal; popularity fol- 
lows the giver; and yet it needs not to be 
said that there are men who could not put 
on the free and easy manner if they would, 
and who would not if they could. It is not 
a question of calling. The late E. H. Har- 
riman knew everybody in Wall Street, and 
everybody knew Harriman. Jay Cooke, 
Mr. Morgan's predecessor in the field of 
great banking, was no mean rival of P. T. 
Barnum, when it came to personal adver- 
tising. And there are statesmen at Wash- 



THE MAN HIMSELF 313 

ington whose disengaged air makes the blood 
of a visitor run cold. It is a question of 
pride. Everything indicates that Mr. Mor- 
gan is personally much too proud to be 
called a very good democrat; if the success 
of his life work had in the least depended 
upon cultivating the friendship of the com- 
mon people, he would surely have failed. 

It is said there are scarcely fifty men in 
the financial district, who have a speaking 
acquaintance with Mr. Morgan. Whether 
the number is correct or not it is certain 
that his acquaintance is relatively small, 
and that his real friendships are reserved 
for a very few people, chiefly the men whom 
he has known all his life and with whom he 
is very likely not associated at all in a busi- 
ness way. His dislike of having a meaning- 
less fuss made over him by strangers is 
shown by his never appearing at public 
meetings and by his perennial irritation at 
the never-say-die reporters and camera men 
who unfailingly close in upon him when he 
is sailing or returning from across the 
w^ater. In London he insists upon not be- 
ing noticed when he comes in or leaves his 
office, and has stopped the custom of show- 



314 J. PIERPONT MORGAN 

ering him with deferential bows which was 
long clung to by his employees. When he 
di'ives up to his house or his office in New 
York he is out of his cab or automobile and 
into the building in two strides, swift and 
purposeful. Anyone who hoped to inter- 
cept him would carry away nothing from 
the attempt but the mental impression of the 
financier's air of extraordinary vigour and 
the recollection of the intent and piercing 
expression of his eyes, fixed straight before 
him. 

An account of the personal traits of a 
living man tends to become a piece of vivi- 
section, more or less unwarranted, unless 
the aim is to suggest his personality, rather 
than to analyse it exactly. Mr. Morgan's 
imposing style and the extraordinary sense 
of vigorous life which emanates from him 
always, make him a personality which sug- 
gests itself, as a matter of fact, in every- 
thing he does, whether it is a matter of 
adding to his collection some very desirable 
picture or piece of china or of straighten- 
ing out the affairs of an all but ruined bank. 
It is a personality of the 01;yTxipian order, 
incapable of doubt and indecision, as simple 



THE MAN HIMSELF 315 

in action as a thunderbolt and as little to 
be argued with. The effects of his instan- 
taneous decisions often surpass those of the 
most deeply laid plans ; no important factor 
has been overlooked; no objection, on the 
other hand, has been seen out of proportion ; 
in his mind^s eye he sees both the end and the 
way to reach it, and after all has been cred- 
ited that need be credited to the painstaking 
labour and preparation of his partners, it 
remains true that the touch of the marvel- 
lous which stamps his success and the suc- 
cess of his firm is due to Mr. Morgan's own 
genius. 

The undebatable quality of his decisions 
reminds us he was almost bred a mathe- 
matician. While at Gottingen Morgan 
specialised in mathematics, and with the 
professor of mathematics he would spend 
long hours at problems. About ten years 
ago a number of New Yorkers who had been 
at the Gottingen University together held a 
dinner and invited their old professor of 
mathematics, who happened to be visiting 
this country, to be present. The German 
stood his ground — he gave them his own 
idea ; looking at Mr. Morgan he said that he 



316 J. PIERPONT MORGAN 

was indeed very glad Ms old pupil had suc- 
ceeded so well as a banker. "But I re- 
gi-et," he went on, ''that you did not remain 
at the university. Had you stayed with me 
you would have been my assistant as long as 
I lived, and, unquestionably, at my death 
you would have been appointed professor 
of mathematics in my place." 

Perhaps the old German's disappointed 
notion of seeing J. P. Morgan a professor 
of mathematics is not so quaint as it sounds ; 
it is worth while to consider him in the light 
in which his old professor saw him — just 
long enough to associate with his person- 
ality some of those very definite traits for 
which mathematicians are renowned. As 
everyone knows, mathematicians are very 
"set" in their ways and go through life 
upon a secure basis of settled notions ; their 
love of precise statement, their antagonism 
to the vague and indefinite, their some- 
what unsocial reliance upon their specialty 
as comprehending all the wisdom of the 
world — are equally well known. And Mr. 
Morgan is at least half a mathematician. 
And so it comes about that the opposite and 
unmathematical side of his nature — his 



THE MAN HIMSELF 317 

faith and his fire, his impenetrable resolu- 
tion and strength in action — relates itself 
inevitably to matters which the hand can 
grasp, the eye can see; to a beautiful vase, 
a promising railroad, a business combina- 
tion of which the gain is as sure as book- 
keeping, a hospital in which actual ailing 
people will be cared for by actual proficient 
doctors — but not, it is fair to say, to some 
political or social enterprise of which the 
benefits are doubtful and where the sin- 
cerity and wisdom of the chief movers re- 
mains to be demonstrated. It is related 
that upon one of the occasions when Mr. 
Morgan dined with the Kaiser, the Emperor 
Wilhelm opened the subject of Socialism, 
and was surprised to find that his guest was 
not in the least interested in a political 
movement of such consequence. 

Mr. Morgan's habit of silence is one 
which he occasionally breaks himself, some- 
times talking a great deal, either on the sub- 
ject of his collections of books and pictures, 
when he meets someone whose interest has 
the effect of drawing him out, or when he 
chances to relate the story of some event 
in his life. The latter thing he rarely does. 



318 J. PIERPONT MORGAN 

even in the midst of liis own family. One 
evening when he was dining at home with 
his wife and daughters and two or three of 
his friends someone asked him a question 
about his negotiation with President Cleve- 
land in 1895, when Mr. Morgan contracted 
to stop the gold from flowing out of the 
Treasury. He started in to tell the whole 
story. He told it in detail, and very viv- 
idly; it was the first time any of the com- 
pany had heard what really happened on 
that exciting and dramatic occasion. Some 
of them had been going to the opera that 
evening; the ladies had even begun to put 
on their wraps. But no one thought any 
more about going to the opera. 

One summer Mr. Morgan's son, ^*Jack" 
Morgan, invited a Harvard classmate to 
spend the night at Highland Falls. ''My 
father's coming up in the evening on the 
Corsair/' he wrote; ''just get aboard and 
come along with him." The guest followed 
directions and found that gentleman seated 
on the deck in an arm-chair, reading a news- 
paper. After saying who he was, the other 
pulled out a paper from his pocket and be- 
gan to read, too. The Corsair moved up the 



THE MAN HIMSELF 319 

Hudson, and both continued to study their 
newspapers in silence until the thirty-mile 
journey was over. ^'Jack" Morgan met 
them at the landing place, and his father, 
happening to be alone with him for a mo- 
ment, remarked, with enthusiasm: "That 
is one of the nicest young fellows I've met." 
Sometimes the Morgan summer place, 
Cragston, at Highland Falls, is filled with 
ir.formal parties of young people who have 
diifted over from neighbouring houses; 
somewhere a little apart from the life and 
movement may be seen Mr. Morgan, sitting 
in a wide-armed chair, self-absorbed, and 
outwardly chiefly interested in his cigars, 
of which he lights one after another. 

His taciturnity and his love of mental 
privacy are extraordinarily marked ; two or 
three years ago, as trustee of the Metropoli- 
tan Museum of New York, he decided to 
pay a visit to the archaeological work in the 
Great Oasis of the Sahara. After a short 
stay in Cairo he chartered the Arabia, 
which had just been vacated by the Princess 
Eoyal, the Duke of Fife, and their daugh- 
ters, for a journey up the Nile; Mr. Mor- 
gan's sister, Mrs. Burns, and his daughter, 



320 J. PIERPONT MORGAN 

Mrs. Hamilton, went with him. While in 
Cairo he remained in his suite at Shep- 
heard's Hotel, and on the river, he was safe 
in the beautiful dahabiyeh from the ques- 
tions of reporters, or the curiosity of travel- 
lers; but there was a young Englishman to 
whom had been deputed the task of con- 
ducting the party on the special train from 
the Nile Valley across the desert — and this 
Englishman related, rather minutely, his im- 
pressions of the journey with Mr. Morgan 
and the shock of surprise which the latter 
gave him: 

''I had been directed to take charge of 
Mr. Morgan and his party in the special 
train he had ordered for the six-hour jour- 
ney across the desert," said the young Eng- 
lishman, *'and at the station he came up to 
me and in a jovial manner asked me how I 
did. This introductory, 'How do you do?' 
were almost the only words he said to me. 
For the rest of the six hours he scarcely 
uttered a syllable, with the exception of 
two terse questions about the desert. 

"Throughout the entire journey he ap- 
peared to be plunged in the deepest thought ; 
he sat, immersed in the profoimdest con- 



THE MAN HIMSELF 321 

templatioD, in the wicker-work arm-chair 
in the little saloon. This mood of silent 
thoughtfulness was the more surprising to 
me, because the journey is so full of interest 
that the ordinary traveller asks numberless 
questions along the route. After leaving 
the Valley of the Nile the line enters a 
long and desolate ravine having immense 
cliff-like walls of grey limestone, and 
finally climbs to the weird plateau of the 
Libyan Desert. Mr. Morgan was left en- 
tirely to himself during this journey; no 
one attempted to draw his attention to any- 
thing. Every now and then he would write 
out a cable message, which was sent off to 
the main line by telegraph from one of the 
little huts or stations on the line. An ex- 
cellent luncheon was set before him, but all 
he took was an egg and a piece of bread, 
and as soon as the egg and bread were fin- 
ished he plunged into thought again. His 
only distraction was smoking big cigars, and 
he must have got through a good number of 
them on this journey." 

Mr. Morgan owns the Santa Clara prov- 
ince in Cuba, where a particularly dark and 
fragrant variety of tobacco is grown; his 



322 J. PIERPONT MORGAN 

cigars are made for him out of this special 
leaf, and these large black cigars of his 
figure in innumerable anecdotes. Here is 
one which he once told himself: "I was go- 
ing aboard the yacht and found that I had 
nothing to light my cigar with; so I ven- 
tured to ask one of the men on the pier for 
a match. In return for the courtesy I 
handed him one of my cigars — which I 
think a good deal of. He accepted it 
promptly. 

" 'Thanks to you,' he said, 'I was just out 
of tobacco.' 

''Then he broke it into little bits and 
stuffed it into his pipe!" 

The estate at Highland Falls shelters at 
all times a great variety of live stock ; a few 
years ago the Morgan collies competed in 
every notable show and carried off the 
prizes, and there were from eighty to a hun- 
dred of these beautiful and terribly 
lively animals barking and running about 
in their inclosure quite near the house itself. 
Collies love to gallop together and bark — 
even more than other dogs ; and eventually, 
partly to do away wdth the noise, the collie 
establishment was reduced and Mr. Morgan 



THE MAN HIMSELF 323 

went in for blooded cattle. The animals of 
his herd are all catalogued by number and 
the owner occasionally strolls out to their 
quarters, catalogue in hand and calls for 
number so-and-so to be led out before him, 
looking the animal over, studying it as he 
does a picture or any other beautiful and 
j)erfect piece of work. 

In his youth Mr. Morgan was fond of rid- 
ing horseback; afterwards he took up 
yachting, and was for several years Com- 
modore of the New York Yacht Club — his 
intimate friends address him as *' Commo- 
dore" still. He built the Colurrihia to de- 
fend the America's cup, and was a member 
of the syndicates that built the other cup de- 
fenders. In the intermissions of his busi- 
ness life when in this country he goes 
aboard the Corsair, and stays there ; and the 
yacht takes him to Cragston, to Newport, 
for a day's fishing, or to Bar Harbour, or 
simply cruises over the sea, with no destina- 
tion. Of bodily exercise, Mr. Morgan 
never has been fond, with the one exception 
of horseback riding; at one time he forced 
himself to work with dumb-bells and ap- 
paratus, being under the impression that 



324 J. PIERPONT MORGAN 

his healtli, which was feeling the strain of 
business, would be benefited. His physi- 
cian, however, advised him to drop all that 
sort of gymnastics, on the ground that it 
was contrary to the habits of a lifetime; 
and since then Mr. Morgan has worked with 
his brain alone, eaten and smoked as he 
pleased — and his strong Yankee constitu- 
tion has carried him through. There is a 
prevailing medical theory that, not mere va- 
cations, but variety of occupation and in- 
terests, especially when coupled with travel, 
will enable one to work at high pressure 
longer than anything else; Mr. Morgan's 
life is an argument in support of this 
theory. His business, from the very be- 
ginning, has involved two or three trips 
abroad each year; and on his journeys over 
Europe the appeal of art and the excitement 
of a collector increased the interest and 
variety of his life until there was no time 
for stopping to become ill. 

Rome, London, Paris, and New York see 
him for a portion of each year. From Lon- 
don the greatness of the Morgan banking 
business may be said to have taken its rise, 
for it was begun through Junius Spencer 



THE MAN HIMSELF 325 

Morgan's succession to the business of 
George Peabody; and when Pierpont Mor- 
gan began for himself in New York he had 
the great advantage not only of a training 
in his father's house, but also received its 
American business. 

In England Mr. Morgan has, beside his 
London office, his mansion at Prince's Gate, 
in which he had placed art treasures from 
every corner in Europe, his place at Putney, 
and another house in Grosvenor Square. 
The Prince's Gate residence consists of a 
four-story mansion, which stands on a cor- 
ner, with its front windows opening on 
Hyde Park, not far from the famous Albert 
Memorial. In recent years he has added an 
art gallery, consisting of an adjoining man- 
sion of almost equal size. The entire inside 
of this building was reconstructed; one of 
the stories at the top was taken out and 
the first floor was raised, so that the space 
from floor to ceiling was doubled. After 
the whole building had been rebuilt to an- 
swer to the needs of a modern art gallery 
it was filled with every sort of beautiful and 
artistic work, from tiny miniatures set in 
little jewelled frames to great paintings by 



326 J. PIERPONT MORGAN 

old masters, ancient cliurcli ornaments, 
tapestries, porcelain, books, and manu- 
scripts. 

There were discontented Americans who 
used to complain because Mr. Morgan left 
so many of his art possessions in England. 
The former Secretary of the Treasury, Les- 
lie A. Shaw, once asked him point blank 
why he did not bring his pictures and 
miniatures and other beautiful things to 
America, where the American people might 
have a look at them. 

Mr. Morgan said: "I can't afford to." 

'*I knew you were a poor man," said 
Shaw, *'but I didn't realise you were as 
poor as that. ' ' 

''Mr. Shaw," returned Morgan, "how 
much do you suppose the duties on my col- 
lections would amount to if I should bring 
them to New York?" 

''Perhaps two or three hundred thou- 
sand." 

"They would amount to at least six mil- 
lions." 

There are agents in Antwerp, Vienna, 
Paris, Brussels, Rome — in fact, in almost 
every Continental city, whose business it is 



THE MAN HIMSELF 327 

to buy for Mr. Morgan whatever they judge 
is a masterpiece. From time to time they 
receive special and urgent instructions to be 
on the lookout for some special piece which 
is needed to complete a collection. Some- 
times Mr. Morgan gets what he wants 
through pure luck, as in the following ex- 
ample : 

He had long possessed an incomplete set 
of Sevres for the mantel; there were five 
pieces in the original set, but Mr. Morgan 
had only succeeded in obtaining four, and 
not in all Europe had he been able to lay his 
hands on the missing fifth piece. One even- 
ing, just as he was sitting down to dinner 
in the house at Prince's Gate, a servant 
brought word that a man was standing at 
the door with a parcel, the contents of 
which he said Mr. Morgan would be greatly 
interested to see. The financier's first im- 
pulse was to send him away ; then a curious 
feeling came over him and he called after 
the servant to show the man up. The 
stranger placed in his hands the missing 
fifth piece of Sevres. 

''You want to sell this?" asked Mr. 
Morgan, placing it on the table beside him. 



328 J. PIERPONT MOEGAN 

*'Yes, you can buy it." 

''What's the price?" 

The man named a large sum, which was 
paid him just as soon as the cash could 
be obtained. Taking a receipt Mr. Morgan 
asked him with a little curiosity : 

"What made you bring this piece to 
meV 

"Well, I had heard of you as a buyer of 
good things," was the reply, "and this is a 
very fine piece of Sevres." 

"I know that," said Mr. Morgan. 

It had been pure chance, after all. 

The collections of miniatures in this gal- 
lery surpass any collection of portraits 
ever brought together before; it is an as- 
semblage of the beauties and the princes of 
two centuries ; out of scores of great names 
here are a few : Charles the Second, Charles 
the First as a youth, Louis the Fourteenth 
on horesback, Mme. de Montespan, Mme. de 
Pompadour, Marie Antoinette, the Princess 
de Lamballe, the Duchess of Devonshire, 
George the Fourth as Prince Regent. The 
oldest miniature is a portrait of Mary, 
Queen of Scots, by an unknown painter, 
which at one time belonged to Charles the 



THE MAN HIMSELF 329 

First, and bears his initials. Mr. Morgan 
caused to be made a wonderful book of 
these miniatures, on the vellum pages of 
which each portrait has been exactly repro- 
duced by hand in the colours of the orig- 
inal. One copy he presented to Queen 
Alexandra, who afterwards came herself to 
Prince's Gate to see the originals and Mr. 
Morgan's other collected works of art. 

In 1902, Mr. Morgan, by a single purchase 
of about seven hundred books and manu- 
scripts, placed his collection in the front 
rank in this sort. The price paid was a 
quarter of a million poimds sterling, and 
among these acquisitions were one hundred 
and eleven illuminated manuscripts — 
French, English, German, Dutch, Italian, 
and Spanish — all remarkable examples of 
antique ornamentation and hand writing. 
Among them was the Huntingfield Psalter, 
a manuscript on vellum, containing ninety- 
two miniatures of scenes from the Bible and 
the lives of the saints, which was executed 
at Mendham Priory toward the end of the 
twelfth century. A wonderful French 
manuscript is a Roman de la Rose, dating 
from about 1380, filled with miniatures of 



330 J. PIERPONT MORGAN 

rare execution. Another is the Bourbon 
Book of Hours, done in 1485 for Charles de 
Roussillon, grandson of Charles, of Bour- 
bon, and cousin to the Prince de Conde, who 
afterward owned it and whose bookplate 
it bears. Another Book of Hours, of Flem- 
ish execution, was bound for Mary Stuart, 
Queen of Scots at the time of her marriage. 
In the collection are over two hundred ex- 
amples of the earliest press work of 
Germany and the Low Countries. Mr. 
Morgan already had the celebrated Guten- 
berg Bible and the Psalter of 1459, which 
long held the distinction of being the most 
valuable books in the world. Year by year 
he has added to this collection, a library at a 
time, buying what he personally likes and 
understands. 

Some extraordinary pieces of old English 
plate have passed into the Prince's Gate 
treasure house from the great auction sales 
held in London within recent years. From 
the time of Henry the Eighth to the reign 
of Charles the First, the Crown possessed 
the most valuable collection of royal plate 
in Europe, but the misfortunes of the latter 
monarch compelled him to dispose of 



THE MAN HIMSELF 331 

practically all this priceless gold and silver 
plate for the purpose of raising money — 
it was all melted down by order of King 
Charles and turned into coin. The present 
collection at Windsor Castle contains only 
two specimens — a rose water dish and ewer 
— older than the time of Charles the First. 
But Mr. Morgan has a Tudor bowl made in 
London when Shakespeare was alive; a set 
of ''Apostle" spoons, dating from the reign 
of Henry the Eighth ; a cup and cover made 
shortly after the accession of James the 
First out of the silver of the great seal of 
Ireland. He has a great silver tankard 
plain and massive and capacious, which 
was presented by Queen Mary to Simon 
Janszen for safely conveying her husband 
"William III., across to The Hague in 1691. 
On the cover is modelled a sitting lion, and 
on the front are engraved the royal arms; 
an inscription in Dutch commends Simon 
to the remembrance of His Majesty "when 
he this cup to his lips doth lift." A fine 
example of a massive silver vase is deco- 
rated with the portraits of Roman emperors, 
and contains three panels, depicting the 
finding of Romulus and Remus, Mettus 



332 J. PIERPONT MORGAN 

Curtius leaping into the pit, and ^^neas 
carrying his father, Anchises, from the 
burning city of Troy. 

To turn from his collections to his busi- 
ness is for Mr. Morgan merely a matter of 
jmnping into a cab, of which there are al- 
ways two or three waiting near his door, 
and driving at a fast pace to the Morgan 
bank on Old Broad Street, just back of the 
Bank of England. It is a very inconspicu- 
ous building, jammed in among a number of 
other banking concerns, chiefly noticeable 
among the buildings of dark grey stone on 
account of its lighter colouring of cream- 
coloured plaster. But inside the office there 
is always a marked amount of bustle and 
confusion, contrasting with the sedate at- 
mosphere of the typical London institutions 
surrounding it. At other times Mr. Mor- 
gan is driven to the offices of his shipping 
combination in Lindenhall Street, where 
there exists an enormous board room, with 
a round table in its centre, about which the 
directors sit. King Arthur style, because no 
one is supposed to possess superior powers 
over the rest At the same time very few 



THE MAN HIMSELF 333 

important matters are decided upon when 
Mr. Morgan is. not present. 

His position in the London world of busi- 
ness is his father's plus the vast accretion 
of power and influence which his own ener- 
gies and successes have brought to it; in 
London Mr. Morgan operates blind pools 
just as he does in New York. There are a 
number of firms in London upon whom he 
can call at a moment's notice for immense 
sums of money. When he sends out a brief 
request for a few millions of pounds he can 
depend upon receiving the money without 
delay. These English houses are as glad 
to come in on anything which Mr. Morgan 
organises as are the American members of 
his syndicates, and they never ask questions 
as to what he means to do with the enormous 
funds at his disposal. 

Between J. P. Morgan and his father an 
interesting comparison might be made; it 
is perhaps sufficient, however, to remark 
that Mr. Morgan's fondness for art and his 
love of collecting were direct inheritances 
from Junius S. Morgan. In Mr. Morgan's 
library in New York there hangs a vigorous 



334 J. PIERPONT MORGAN 

portrait of his father, which has the follow- 
ing curious history: 

In the early eighties a poverty-stricken 
American walked into the rooms of Agnew 
& Co., the celebrated art dealers of London, 
and asked for Sir William Agnew. Sir 
William was not in, and the salesman asked 
the man what he wanted of him. The 
American gave the name of Bragard and 
asked for the loan of a shilling. 

*'Why should I give you a shilling?" the 
clerk asked. 

*' Because I am an artist," replied Brag- 
ard, *'and your firm has made a great deal 
of money through us artists — enough, I am 
sure, to warrant my request." 

The salesman hinted his doubts of the 
man being an artist, whereupon Bragard 
asked for a pencil. Then he began to copy 
a portrait which was hanging on the wall, 
and the salesman looked on in amazement 
while the man worked. Bragard showed 
he was indeed an artist, and that he was 
something more than an ordinary artist; 
it ended with the clerk's giving him five 
shillings and a promise to try to interest 



THE MAN HIMSELF 335 

Sir William Agnew in getting liim a com- 
mission. 

A few days afterward, Junius S. Morgan, 
who was an old-time patron of the Agnew 
firm, met Agnew and was induced to sit for 
his portrait to his hard-pressed fellow 
countryman. The young man said the 
portrait would require ten sittings, and as 
the work progressed it caused somewhat of 
a furore among London connoisseurs; in 
fact, before the ten sittings were completed 
Bragard received at least ten thousand 
IDOunds in commissions from distinguished 
Londoners for their portraits. 

When Junius Morgan's portrait was 
finally finished he counted out five hundred 
pounds in bills and handed them to the art- 
ist. ''You will require no more sittings 
from me, I suppose?" he asked. 

Bragard replied that he was not perfectly 
satisfied with the hands and would like one 
more sitting in order to touch them up by 
daylight. 

The next day Mr. Morgan appeared at the 
studio as usual, but Bragard failed to come. 
The studio remained empty, and to this day 



336 J. PIERPONT MORGAN 

there has not been discovered the slightest 
trace of the artist. His name was probably 
assumed, for all efforts to trace him or to 
learn where he came from proved abso- 
lutely futile. 

It was like J. P. Morgan's father to order 
his portrait painted by an artist who had 
more talent than recognition, and it was 
like his son as well; perhaps a dozen years 
later, in Paris, the American financier did 
something of the same sort. It had been 
constantly suggested to him by his family 
and friends in New York that he let this 
or that artist of prestige and reputation 
paint his portrait. Mr. Morgan never took 
any real interest in these suggestions; he 
could not be induced to set aside the time 
for the necessary appointments. To one 
portrait painter he gave a single sitting, of 
an hour — and that was all. But one morn- 
ing in Paris a friend dropped in to see him 
and said that he had discovered an artistic 
genius in one of the garret studios of the 
Latin quarter. ''Let's go and see his 
work," said Mr. Morgan, and they spent 
the rest of the morning looking at the can- 
vases of the unknown, admiring them so 

f 



THE MAN HIMSELF 337 

greatly that Mr. Morgan conmiissioned the 
artist on the spot to come over to New York 
to paint his portrait. The artist came the 
following winter and Mr. Morgan gave him 
all the sittings needed to complete the pic- 
ture, which now hangs in his library. 

On another visit in Paris Mr. Morgan 
heard of three wonderful tapestries which 
were for sale by a famous dealer in an- 
tiques. The tapestries were of the time of 
Charles the Seventh, historical documents 
of rare value, because they illustrated with 
undoubted accuracy the costumes and cus- 
toms of that distant period. Mr. Morgan 
made an offer for them on behalf of the 
Metropolitan Museum of New York, and at 
about the same time the directors of the 
Louvre asked for an option on the tapes- 
tries. A popular agitation was begun in 
the newspapers to prevent their exportation 
from France. Mr. Morgan went to the 
antiquarian and said: 

''If France decides not to buy those tapes- 
tries, I will." 

The day before the expiration of the 
French option the seller was asked to ex- 
tend it another week. A Louvre director 



338 J. PIEEPONT MORGAN 

explained that it was hoped that by that 
time the Minister of Fine Arts would give 
his consent to the purchase. The seller 
went to ^Ir. Morgan for his consent to this 
arrangement, and the financier promptly 
made his position clear, saying : ' ' It is not 
the habit of the Metropolitan Museum, nor 
is it my habit, to prevent such an institution 
as the Louvre from obtaining what it wants 
of the works of art of its own country." 
He added that he would gladly consent to 
the extension of time. 

But at the end of another week the Min- 
ister of Fine Arts still contended that the 
price was too high. Mr. Morgan bought 
the tapestries. Ten days afterward the di- 
rectors of the Louvre made a proposal to 
Mr. Morgan to buy back one of the tapes- 
tries. Mr. Morgan replied that he was very 
sorry, but it was now too late. 

Each time he goes to Rome he finds him- 
self more at home, more and more an 
honourary citizen of that city in which 
centers the universal movement of art of all 
times. His return of the Ascoli cope, after 
he had learned that this expensive purchase 
had been stolen, was a definite act of a sort 



THE MAN HIMSELF 339 

which could not but create a friendly feel- 
ing toward him in Italy ; on the occasion of 
the artistic festival of 1911 he was invited 
to accept the honourary presidency of the 
foreign connnittee in a remarkable letter, in 
which, after referring to the important char- 
acter of the exhibition, the committee said: 
"It is very natural, sir, that our first thought 
should turn to you, whose enlightened taste, 
profound knowledge and generosity with- 
out limit have made you the most enlight- 
ened Maecenas of our times, and who has 
given Italy living proofs of sympathy, for 
which we preserve sincere gratitude." 

To return to Mr. Morgan's life in New 
York, he completed in 1905 the beautiful 
art gallery, known as his "library," which 
stands in Thirty-sixth Street in the lot be- 
tween his own residence and that of his son- 
in-law, Mr. Satterlee. The building is in 
the Italian Renaissance style, in white 
marble, approached from the street by a 
stone walk, which cuts through a vivid ob- 
long of green lawn. Once inside the bronze 
doors of the building one finds oneself in 
a vaulted entrance hall paved with Roman 
stones, with a great circular piece of 



340 J. PIEEPONT MORGAN 

porphyry, on either side of which stands a 
pair of Cipolino columns of greenish marble 
from the Chateau de Bagatelle in the Bois 
de Boulogne. Through a central double 
skylight, of glass so transparent that the 
blue of the sky is seen as through the empty 
air, the light falls upon the walls and floor, 
and is reflected back to the creamy decora- 
tions of the panels. Around the octagon of 
the skylight are painted the Muses of 
Art, Science, Literature, and Philosophy; 
there are groups of figures, scriptural, and 
allegorical; the backgrounds are of Mosaic 
gold and the general background of the ceil- 
ing is gold, bearing a tracery of graceful 
arabesques. The books are in an East room, 
on shelving of Circassian walnut, above 
which are medallion portraits on a back- 
ground of gold — the whole bathed in 
a warm, tempered light from the glass- 
panelled ceiling. In this beautiful and 
expressive building, the whole effect of 
which, in its architecture and decora- 
tions, is to proclaim the spiritual great- 
ness of its contents, are stored books and 
manuscripts which it would require a vol- 



THE MAN HIMSELF 341 

Time to enumerate and several volumes ade- 
quately to describe. 

To mention only a few, and of hundreds 
of manuscripts, there is the manuscript of 
** Paradise Lost," of Keats' *'Endymion," 
Shelley's notebook, Pope's *' Essay on 
Man," Lord Byron's '^Don Juan," ''The 
Corsair," "Marino Faliero," Burn's ''Auld 
Lang Syne," ''Mary Morrison," "Comin' 
Thro' the Rye," "Tam O'Shanter," "The 
Cotter's Saturday Night," the manuscript 
of a poem by Swift describing Stella at 
Wood Park, of Scott's "Waverley," "Ivan- 
hoe," "Anne of Geierstein," "Old Mor- 
tality," "Guy Mannering," "The Lady of 
the Lake," and Scott's own journal. Most of 
the famous novelists and essayists of Eng- 
lish literature in the nineteenth century are 
represented in the collection — George Eliot, 
Anthony TroUope, Charles Reade, the 
Brontes, Macaulay, Carlyle, Ruskin. Of 
American authors and statesmen, Poe, 
Whitman, Hawthorne, Thoreau, Washing- 
ton, Adams, Franklin, Jefferson, are each 
represented by the manuscripts of their 
major works, or by letters. 



342 J. PIERPONT MORGAN 

The collection and preservation of such 
relics of past greatness as these manuscripts 
seems properly the work of national govern- 
ments; Mr. Morgan has stepped in to do 
what the Government of this country has 
not been particularly efficient in doing, and, 
besides gathering these unreproducible doc- 
uments, he has shown how they should be 
housed and cared for, in safety from fire 
and in a fit artistic setting. His gifts to 
the Metropolitan Museum of Art, not only 
of pictures, but of an entire section of the 
Hoentschal collection, and what appears to 
be a permanent loan of the famous Garland 
collection of Chinese porcelain, are well 
known. His native city of Hartford, 
Conn., has frequently received evidences of 
Mr. Morgan's interest in his birthplace. 
His father before him had made gifts to 
the public institutions in Hartford, and at 
one time both father and son made impor- 
tant gifts to the Wadsworth Athenasum, 
which, in the old days, was a reading-room 
and gathering place for lectures of a liter- 
ary or artistic character. In 1890 a plan 
was set on foot to broaden the usefulness of 
the old Athenaeum, and Mr. Morgan then 



THE MAN HIMSELF 343 

announced that he would give six hundred 
and fifty thousand dollars to build an art 
gallery as an addition, to be known as the 
Junius S. Morgan Memorial. About the 
only stipulation he made was that the build- 
ing should be of Knoxville marble, and that 
the plans should be submitted to him. 
When completed he presented the gallery 
to the city with many pictures and curios. 

This memorial is almost the only one of 
all his gifts to which the name of Morgan 
is definitely given; the common custom of 
philanthropists of associating their own 
name and fame with benefactions has never 
appealed to him; all his life he has been 
a quick and ready giver of enormous sums 
or of objects which cost enormous sums, 
but has totally neglected to advertise him- 
self at any stage of the proceedings; his 
reticence on this head, as upon so many 
other matters, is one of the strongly marked 
elements of his personality. An account of 
his gifts would produce an endless cata- 
logue — he searches Europe for its art treas- 
ures, brings them to New York and gives 
them to the Art Museum, the Historical 
Society, and the Cooper Union ; gives a col- 



344 J. PIERPONT MORGAN 

lection of the manuscripts of Burns to the 
Liverpool Library and the Pan-American 
collection of gems to the Museum of Nat- 
ural History in Paris; pays the yearly gas 
bill for St. Paul's Cathedral in London, 
gives a million-dollar jDlot for a lying-in 
hospital in New York, and then builds and 
finances the institution ; gives half a million 
to the cathedral of St. John the Divine in 
New York, a million to the Harvard Med- 
ical School, five hundred thousand dollars 
to the Trades Training School, another half 
million to the Loomis Sanatarium, a hun- 
dred thousand to the Y. M. C. A., a hun- 
dred thousand to the public library at Hol- 
yoke, Mass., a new parish house and rectory 
for St. George's Church in New York, of 
which he is a vestryman, a hundred and 
twenty-five thousand for saving the Pal- 
isades along the Hudson, an isolation pavil- 
ion at Aix-les-Bains — and so on without 
end. These charities are personal — that is, 
Mr. Morgan does these things himself, hav- 
ing no secretary or bureau of any kind to 
attend to these matters. He relies on his 
own judgment and has no set plan for giv- 



THE MAN HIMSELF 345 

ing, the only conditions which have to be 
met being, apparently, that the person who 
comes with a request shall impress him as 
a man able to carry out his plans, and that 
the undertaking itself shall be one of clear 
practical usefulness. 

His manner of granting such requests is 
peculiar to him. In practical matters his 
manner is as decisive and blunt, and his 
speech as laconic as that of a military com- 
mander in the midst of an engagement ; but 
the people whose vanity is hurt by his short- 
ness of speech and inattentive air fre- 
quently find that the injury stops there, and 
that he is in reality giving them what they 
ask, and more. He was caUed upon one 
day by a physician who had become inter- 
ested in the problem of how to care for poor 
w^omen who were approaching confinement. 
To the explanation of the physician Mr. 
Morgan appeared to listen impatiently; he 
asked one or two brusque questions. Then 
he said: *' Bring me your plans for a suit- 
able building and endowment and I'll pro- 
vide the money." It was over in five min- 
utes, and just when the visitor thought he 



346 J. PIERPONT MORGAN 

was about to be dismissed with a curt "No," 
his request involving the expenditure of a 
million and a half was granted. 

Just after the close of the first term of 
William R. Grace as Mayor of New York, 
he became much interested in a contem- 
plated philanthropy, and undertook himself 
to secure subscriptions sufficient to justify 
beginning the benefaction. With this pur- 
pose in mind he called upon Mr. Morgan. 
He did this all the more readily because he 
remembered that Mr. Morgan was one of 
the few men of large affairs in New York, 
who, while he was Mayor, had never asked 
for any patronage, and had never sought 
any favours for himself or his banking firm 
from the city. Mayor Grace stated the 
nature of his errand to Mr. Morgan, who 
answered so briefly and bluntly that Mayor 
Grace felt hurt. He turned to go away 
without another word. 

"Where are you going?" said Mr. Mor- 
gan. 

"I am going to leave your office. You 
must pardon me for annoying you with this 
matter." 

* ' Wait a moment, ' ' said Mr. Morgan. He 



THE MAN HIMSELF 347 

took his pen and, after briefly writing some- 
thing, gave the paper to Mr. Grace, saying : 
"There, take that. Come in again when 
you are going by and tell me how you are 
getting on." 

The paper which he gave to Mr. Grace 
was a check for five thousand dollars. 

After George W. Perkins came to New 
York to live as an officer of the New York 
Life Insurance Company he selected a home 
at Riverdale-on-the-Hudson, directly op- 
posite the beginning of the Palisades. Mr. 
Perkins, with others, undertook to save the 
Palisades from the destructive work then 
under way by quarrymen. It was discov- 
ered that it would be necessary to buy the 
holdings of the men who were working the 
quarries, and Mr. Perkins, after consulta- 
tion with them, found that it would be pos- 
sible to make the purchase for one hundred 
and twenty-five thousand dollars. 

In order to secure this money Mr. Perkins 
decided to make personal appeal to several 
men of wealth. His first call was upon Mr. 
Morgan. He was not at that time a member 
of Mr. Morgan's banking house. He set 
forth the plan by which it was hoped it 



348 J. PIERPONT MORGAN 

would be possible to begin the work of secur- 
ing the Palisades so that ultimately the 
whole stretch of them might become a public 
park. 

*'How much do you need?" said Mr. Mor- 
gan bluntly, and Mr. Perkins told him. 

"Well, you go and see Rockefeller and 
Stillman and some others. See what they'll 
give. Then you can come back to me and 
I'll see what I'll do." 

"But, Mr. Morgan," Mr. Perkins ven- 
tured to say, "I had hoped you would lead 
off the subscrij)tion list and then it would 
be easy for me to secure other subscriptions 
in sufficient amount to raise the sum 
needed." 

"Oh, well," said Mr. Morgan, "put me 
down for the whole amount." 

This was so bluntly said and with such 
apparent indifference, as though the whole 
matter was then and there dismissed, that 
for a moment Mr. Perkins did not know 
what to say. Mr. Morgan turned to his 
desk and took up other business as though 
the incident was closed; as in fact, it was. 

When Dr. Rainsford, for years the rec- 
tor of St. George's Church, of which Mr. 



THE MAN HIMSELF 349 

Morgan was and is a member, put before 
Mr. Morgan his plan for greatly enlarging 
the church work and building up a social 
influence as well as moral, intellectual, and 
technical trade auxiliaries of church work, 
Mr. Morgan listened, hardly interposing a 
remark. At last he said in his quick and 
what is often called his brusque manner, 
"Go ahead, meet your expenses as far as you 
can. Then bring me a statement every 
quarter or six months and I'll make good 
any deficit." 

In this way began one of the strongest 
church organisations, doing a work of phi- 
lanthropy, morality, and education to be 
found anywhere in the world. 

These are things which Mr. Morgan, in 
his incorrigibly reticent and offish way, is 
constantly doing. His failure to dramatise 
himself in the role of giver is conspicuous; 
it is human to mingle one's sympathies a 
little with the grateful recipient of favours, 
it is human to unbend and emotionalise and 
soften at the thought of one's magnanimity 
and greatness — everyone who has given 
five cents to a beggar knows this pleasure. 
But Mr. Morgan has remained incorrigibly 



350 J. PIERPONT MORGAN 

unhuman in some of these relations with his 
fellow men; it seems clear that he has a 
higher regard for his dignity than for 
others^ liking, and that he is extreme in 
this, as in some other personal traits; that 
he believes when a thing is to be done it 
should be done without fuss or impressive- 
ness, and that no occasion of the sort is 
really an "occasion" at all. This trait of 
plainness and sternness of manner and bear- 
ing, if he had not carried it so far, would 
have made him immensely popular. His 
aloofness renders that impossible. Never- 
theless, if he had ever undertaken to hold a 
difficult public office, so great is the admira- 
tion of the American people for efficiency 
and personal force, they would have made 
him a hero in spite of himself. 

In June, 1910, Mr. Morgan received the 
degree of LL.D. from Harvard University. 
President Lowell presented it to him with 
these words: "John Pierpont Morgan, 
public spirited citizen, patron of literature 
and art, prince among merchants; who by 
his skill, his wisdom, and his courage has 
twice in times of stress repelled a national 
danger and financial panic." As a descrip- 



THE MAN HIMSELF 351 

tion of Mr. Morgan's special place in his 
time the words seem inadequate, because 
they fail to take account of the Morgan super 
quality of constructive financial genius. To 
complete the characterisation there would 
need to be added something like this: 
^'Who, in an age of enormous industrial 
progress, when the character of industrial 
units underwent a necessary change, did 
more than any other man to establish the 
new regime on a sound, permanent basis." 

The Morgan influence is Mr. Morgan's 
greatest achievement, the authority of his 
methods and ideas, and, concretely, the au- 
thority of his banking house. When Mr. 
Morgan dies there will still be Morgan; 
the House of Morgan, built up upon his 
personality and credit, will not at once suf- 
fer abatement of prestige in any of its far- 
reaching ramifications. It may, indeed, 
begin to decline in time if his son and the 
partners of his selection prove unable to 
keep up to the standard. In this continu- 
ing and permanent Morgan quality is to 
be found new evidence of the singularity 
and essential strength of the man himself. 
When Harriman died, the Union Pacific, 



352 J. PIERPONT MOEGAN 

the railroad which he had chiefly made his 
own, retained very little Harriman influ- 
ence; when the Yanderbilts loosened their 
hold on the New York Central or when 
Garrett died, leaving behind him the w^ork 
of his life, the Baltimore & Ohio, or when 
Hill, of the Great Northern, dies, there 
was or will be nothing to speak of left of 
these men in their institutions ; as financial 
factors their names become of no import. 
It is entirely otherwise with the name of 
Morgan. 



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